| Summary: | 碩士 === 元智大學 === 管理研究所 === 93 === This study hypothesizes if employees’ bonus it is indeed part of the cost of the firms the cost of capital computed by the inverse of price-to-earnings ratio, which treated employees’ bonus as a distribution of profit, will be unrelated to the beta. On the other hand, the adjusted cost of capital (counting the employees’ bonus) will be related to the beta. If investors had realized that employees’ bonus to be an expense, shares that have higher employees’ bonus should have lower P/E ratio.
The Sample firms are: (1) TSE listed firms and (2) which have positive earnings and no missing necessary financial information in consecutive eleven yeas from 1993 to 2003. A multiple regression analysis was used to study the relationship between the beta and the cost of capital. The results indicate that the beta and the cost of capital after adjusting the employees’ bonus as an expense are more strongly associated then when no adjustments were made to the cost of capital.
Using the T-test analysis, the empirical results support the hypothesis that there is a negative association between employees’ bonus shares and P/E ratio in 2003, but there is no significant result in 2002. Such difference could be due to the wide publicity of the nature of the employee stock bonus and investors became aware of it and adjusted the stock price accordingly.
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