| Summary: | 碩士 === 國立臺北大學 === 會計學系 === 92 === After Ball and Brown (1968) provided empirical evidence that earnings and stock returns were positively related, empirical studies between earnings and stock prices were emerging, and most results showed that there was a significantly positive relationship between earnings and stock returns. Besides, some researchers studied in companies with negative earnings, discovering that when companies (1) reported negative earnings, (2) filed for bankruptcy, (3) had a deficient financial status or an increasing bankruptcy opportunity, (4) voluntarily liquidated, the importance of book values was far greater than earnings. In addition, the liquidating value for companies with negative earnings has more incremental information contents (Healy, 1995) and it is cash flows that directly affect the indicators of company’s liquidating value. On the other side, if continuing negative earnings more possibly result in bankruptcy and financial status before bankruptcy would reflect on financial ratios, suggesting that financial ratios can be used in predicting bankruptcy (Altman, 1977), financial ratios may also have more capability of prediction on the persistence of negative earnings. Therefore, this study investigates the relationship between the persistence of negative earnings and financial ratios for public-listed companies in Taiwan. This study is based on four hypotheses. First, to investigate whether information contents of cash flows are more than those of negative earnings for companies with negative earnings. Second, to investigate whether information contents of cash flows from operating activities, from investment activities and from financial activities are all different for such companies. Third, to explore whether information contents of cash flows from operating activities, from investment activities and from financial activities are different between companies with positive and negative earnings. Forth, to explore whether the financial ratios of companies with continuing negative earnings are significantly diverse from those without continuing negative earnings.
The empirical results shows that information contents of cash flows from operating activities, from investment activities and from financial activities are all different for companies with negative earnings, but information contents of cash flows from operating and financial activities are not significant, and classifying cash flows into operating, investment and financial activities will generate incremental information contents. On the issue that information contents of cash flows provided by companies with positive and negative earnings may be different, the results indicate information contents of cash flows provided by companies with positive and negative earnings are substantially different, and information contents of cash flows from operating, investment and financial activities are also different. Furthermore, the discriminant analysis showed that when companies report negative earnings for the first time, their net value returns and cash flows to debts ratio are lower, and net value growth rate and net income rate before tax are higher, they may have continuing negative earnings.
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