Author(s): Gee-Jung Kwon
This study examines how accounting information such as book value of equity, accounting earnings, cash flow, operating income, and operating cash flow affect the corporate value of manufacturing companies listed on US and Chinese stock markets from 2008 to 2015. The empirical analysis shows that, first, the book value of equity has the greatest effect on increases in firm value in all models; accounting earnings, operating income, and operating cash flow have a negative effect on corporate value, and cash flow has positive value relevance. Second, comparing the results of regression analyses of US and Chinese manufacturing companies reveals that the book value of equity is the most valuable factor among US companies; cash flows and operating cash flows help increase firm value; and accounting earnings and operating income reduce firm value. For Chinese firms, accounting earnings show the highest value relevance, followed by operating income and net cash flows, while operating cash flow has a negative impact on corporate value growth. The book value of equity, the most value-relevant factor for US firms, helps reduce corporate value for Chinese companies. This study provides information that investors seeking to invest in US and Chinese manufacturing companies can use to evaluate enterprise value. Capital market participants can also use this study’s empirical findings to evaluate the value of enterprises when making investment decisions.