The Value-Relevance of Financial and Nonfinancial Information?Evidence from Taiwan?s Information Electronics Industry

Abstract

This study integrates general measurements of the information electronics industry based on the concepts of the balanced scorecard, intellectual capital, and intangible assets. The reasons for the difference between the corporate market value and book value are also analyzed, and the impacts of both financial and nonfinancial perspectives on the corporate value are explored. The component items of net income are found to be more effective in explaining the value of a company than merely looking at the bottom line. It is concluded that RI and EVA have significant and similar explanatory power in terms of evaluating the performance of the information electronics industry. Moreover, a review of the nonfinancial performance of information electronics companies on the basis of segmented samples reveals significant results in terms of explaining the value of the upstream, midstream, and downstream companies.

The accounting treatment of intangibles – A critical review of the literature

“…The study shows that the decline has been more pronounced in the highly intangible-intensive companies. More recently, Liang and Yao (2005) confirmed these results using a sample of Taiwanese high-tech companies. Indeed, their results show that traditional financial measures did not provide significant explanatory power in terms of corporate value.…”

“…In a similar study, Liang and Yao (2005) showed, using a sample of Taiwanese electronics industry firms, that non-financial information disclosed about intangibles has incremental explanatory power far beyond financial information in explaining a company's value. This result implies that non-financial information supplements financial information in evaluating this kind of companies.…”

“…These problems imply that the traditional accounting model, which is based on tangible assets, historical costs, and accounting conservatism, is incapable of fully evaluating the new-economy companies (Lev & Zarowin, 1999;Liang & Yao, 2005;Upton, 2001).…”

Market Value, Book Value and Earnings: Is Bank Efficiency A Missing Link

“…Which means only accounting information are not sufficient to explain the current stock prices. Number of previously studies support the fact that only book value of banks are insufficient for example, according to Liedtka (2002) as well as another famous researcher Liang an Yao (2005) found in their study that only accounting information are insufficient and stock prices are better explained by the combination of economic information as well as the financial information.…”

Intellectual Capital and Profitability: A Firm Value Approach in the European Companies

“…Thus, Salojärvi (2004) found that companies that implement active practi ces to manage their intangibles obtain better results in inno vation and in the development of new products processes. To Liang, Yao (2005), net income is the most significant explanatory capability in market value of Taiwan infor mation electronic company when examined on intangible assets, balanced scorecard and intellectual capital, respecti vely. Tan et al (2007) evidence that intellectual capital and company's performance is positively related.…”