2005 12 25-46 44 24 21 25

Journal of Accounting and Corporate Governance Volume 2 Number 2, December 2005 pp.25-46 The Incremental Value of Information Transparency for Explaining Corporate Value Jian-Hsin Chou National Kaohsiung First University Tsung-Te Lin ADDA Corporation Abstract This study uses 44 electronic sector stocks trading in the Taiwan Stock Exchange as research targets and investigates the incremental value of information transparency for the purpose of explaining this corporate value. We have adopted the method of Content Analysis, which includes 24 items of a voluntarily revealed annual financial report and 21 items of website information that measure information transparency. Meanwhile, this study adopts the Economic Profit (EP) for measuring the corporate value. There are four explanatory variables, including the Rate of Sales Growth (SGR), Rate of Earning Before Interest and Tax Growth (EBG), Capital Expenditure (CE) and Working Capital (WC), which are used to test the explaining ability by a stepwise regression analysis. Finally, we took the information transparency variable into account and investigated whether it could increase the explaining ability once more. The empirical results show that there surely exists a positive relationship between the information transparency and business evaluation. Also, the annual financial report information has more explaining power than the website information. Keywords Information transparency, Corporate value, Economic profit 26

27 Transparency ( 2002) 1 (Heflin, Shaw, and Wild 2001) (Botosan 1997 2002 2003) (Healy, Hutton, and Paleau 1999 Byard and Shaw 2002) 2002 1 (2003)

28 Journal of Accounting and Corporate Governance Botosan(1997) (2000) Brounen, et al. (2001) (2003) (2003) (2003) 50% Diamond and Verrecchia 1991 Healy and Palepu 1993 Welker 1995 Healy and Wahlen 1999

29 Bloomfield and Wilks 2000 Amihud and Mendelson 1986 Diamond and Verrecchia 1991 Lang and Lundholm 1996 Botosan 1997 122 1990 Ho and Wong 1999 Sengupta 1998 1987 1991 Financial Analysts Federation, FAF Price Waterhouse Coopers PWC S&P FAF FAF Welker 1995 Lang and Lundholm 1996 Sengupta 1998 Healy and Wahlen 1999 2001 1200 400 28 35 35 98

30 Journal of Accounting and Corporate Governance content analysis informational analysis documentary analysis ( Botosan 1997 1999 2000 Ho and Wong 1999 Botosan 1997 2000 (2002) Ho and Wong 1999 1997 1999 1 0 2000 1 1 Stern 1993 MVA Lieber 1996 1999 EVA EPS RI MVA MVA MVA Stern 1993 EVA Gressle 1996 Lehn & Marhija 1996 241 EVA MVA

31 (Fisher 1995 Copeland et. al. (2002) EVA EP EP EP 2000 Free Cash Flow FCF Economic Profit Calculation EPC Scenario Analysis 2001 1990 1995 EP 1995 1999 Lehn and Marhija 1996 1999 2001 EVA EVA EP 2002 2 5 3 4 2 3 0930006 ( ) 4

32 Journal of Accounting and Corporate Governance 2002 4 (Botosan 1997 2002 2003) Rappaport (1986) (1998) Collins, Maydew and Weiss (1997) Barth, et,al. (1998) ( ) 1. Transparency, T FAF

33 2002 5 ( ) 2002 4 ( ) 1 2. Sales Growth Rate, SGR SGR i, t = ( Si, t Si, t 1) / Si, t 1 SGR i, t i t S i, t i, t 1 i t S i t-1 3. EBIT Growth, EBG Earnings Before Interest and Tax EBG i, t = ( EBi, t EBi, t 1) / EBi, t 1 EBG, i t i t EB i, t i t EB i t-1 i, t 1 4. Capital Expenditure, CE

34 Journal of Accounting and Corporate Governance CE = NFA i, t NFAi, t 1 NFA i, t i t NFA i, t 1 i t-1 5. Working Capital, WC WC = CA CL CA CL ( ) (EP) EP = CI ( CIR WACC) CIR = EBIT CI WACC = W K e = R CI f d + ( R m d t 1 K (1 T ) + W K R f ) β CIR WACC EBIT CI t-1 5 K d W d 6 K e W e e e 5 (K d ) = / ( + + ) 6 K e = R + ( R m R ) β f f

35 T 25% R f 10 R m -R f R m 1990 2000 1999 2000 ( ) 2001 90 2003 6 5 44 2003 5 6 E-mail 21 14 ( ) 1. 2001 1 1 2002 2001 2001 2. 2003 6 5 2002 2003 5 6 3. 2002 2001 2002 ( ) 2001~2002

36 Journal of Accounting and Corporate Governance ( ) ( ) ( ) EP = α + βt + ε EP T EP = α + β SGR + β EBG + β CE + β WC + ε 1 2 3 4 SGR EBG CE WC Collins, Maydew and Weiss (1997) Barth, et,al. (1998) (1) (2) ( ) ( ) 30% GAAP

37 * ** 44 6.818 16 6 3 5 7.362 2.713 28.4% 44 4.000 11 4 1 3 3.209 1.791 26.7% 44 2.773 7 3 0 3 1.947 1.395 34.7% 44 0.046 1 0 0 0 0.044 0.211 4.6% * 2003 6 5 44 ** 24 15 8 1 = / ( ) 26.7% 21 5.6 * ** 90 5.600 23 3 0 1 34.512 5.875 26.7% 90 2.433 11 0.5 0 0 9.821 3.134 27.0% 90 0.656 3 0 0 0 1.150 1.072 21.9% 90 2.278 8 2 0 1 3.282 1.811 28.5% 90 0.178 1 0 0 0 0.148 0.384 17.8% * 90 ** 21 9 3 8 1 = / EP Panel A Pearson EP

38 Journal of Accounting and Corporate Governance EP Panel B Pearson EP Panel A 1 EP Pearson 0.5905 1 0.000-0.0283 0.2352 1 0.855 0.124-0.0893 0.0203 0.0381 1 0.564 0.895 0.806 0.1948 0.1514 0.0027 0.7943 1 0.205 0.326 0.986 0.000 0.4293 0.3564 0.1957 0.4950 0.6462 0.003 0.017 0.203 0.000 0.000 Panel B 1 0.5905 1 0.000-0.0283 0.2352 1 0.855 0.124-0.0893 0.0203 0.0381 1 0.564 0.895 0.806 0.1948 0.1514 0.0027 0.7943 1 0.205 0.326 0.986 0.000 0.2607 0.0.2964 0.2536 0.5057 0.5893 1 0.037 0.005 0.936 0.000 0.000 0.5606 0.3212 0.0124 0.5057 0.4889 0.4194 0.000 0.030 0.096 0.069 0.000 0.004 1 1

39 p-value F 2 R Adjusted 2 R 90 2003 6 5 44 44 ( ) p 1% p 5% 0.1648 0.2980 0.0458 EP = α + βt + ε t p R 2 Adjusted 2 R F 0.1577 3.0802 0.0036 0.1843 0.1648 9.4876 0.4948 4.3881 0.0000 0.3143 0.2980 19.2551 0.1275 1.7503 0.0874 0.0680 0.0458 3.0636 ( ) ( )

40 Journal of Accounting and Corporate Governance p 0.0001 0.0000 2 Adjusted R 0.3531 35.31% 49.04% EP = α + β SGR + β EBG + β CE + ε 1 2 3 EP = α + β SGR + β EBG + β CE + β T + ε 1 2 3 4 t P t p 5.7864 (SGR) 5.0896 0.0000 4.4748 4.0686 0.0002-0.1340 (EBG) -1.3911 0.1719-0.1689-1.9348 0.0603 (CE) -0.0213-0.7797 0.4401-0.0701-2.4288 0.0199 (T) 0.1658 3.2349 0.0025 44 44 Adjusted 2 R 0.3531 0.4904 F 8.8253 10.8013 p 0.0001 0.0000 5% :

41 ( ) ( ) ( )

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45 (15 ) 1. 2002 2. 2002 3. - 2002 4. 5. - 2002 6. - 2002 7. 2002 8. 2002 9. 2002 10. 11. 12. 2002 13. 2002 14. 2002 15. 2002 (8 ) 1. 2002 2. 3. 2002 4. 2002 5. 2002 6. 2002 7. 2002 8. (1 ) 1. GAAP

46 Journal of Accounting and Corporate Governance (9 ) 1. 91 2. 90 2002 3. 90 2002 4. 2002 5. 2002 6. 2002 7. 2002 8. 2002 9. 2002 (3 ) 1. 2002 2. 2002 3. 2002 (8 ) 1. 2002 2. 2002 3. 2002 E-mail 4. 2002 5. 2002 6. 7. 8. (1 ) 2002 E-mail 92 EPS