| Summary: | 碩士 === 國立成功大學 === 會計學系碩博士班 === 93 === Investing in Mainland China through holding companies becomes more and more appealing ever since the international trade between Taiwan and Mainland China boosts in the recent years. To provide helpful guidelines to investors for their decision making process, we investigate the information value of income resulting from investing in the holding companies and the subsidiary companies in Mainland China in perspective of consolidated financial statements and the financial statements of parent companies.
Our sample base includes both TSE-listed and OTC-listed companies, and the observation period is from 2000 to 2003. Based on the empirical results of regression analysis showing that the type of related-party activity has significant impact on the investment income, our samples are classified by the type of related-party activity throughout the process of the empirical analysis. Considering the income resulting from the investment in the holding companies and the subsidiary companies in Mainland China separately, we conduct association study to examine the impact of each of them respectively on the stock returns when they are reported in the consolidated financial statements and when reported in the financial statements of the parent companies. The empirical results are summarized as follows:
[Holding companies]
The investment income reported in the financial statements of parent companies has less information value than that disclosed in the consolidated financial statements, which suggests that the investment income reported in the consolidated financial statements contributes more to the equity values than the financial statements of parent companies.
[Subsidiary companies in Mainland China]
The investment income has significant impact on the accumulated abnormal stock returns no matter it’s reported in the consolidated financial statements or the statements of parent companies.
The above discussion leads to a conclusion that, when reported in the consolidated financial statements , both of the investment income resulting from investing in the holding companies and the subsidiary companies in Mainland China provides important information for investors that should not be overlooked.
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