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Relative strength of business groups and the value-relevance of earnings for group-affiliated companies

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  • Xiang, Jiafeng
  • Sheng, Zhiyun

Abstract

This paper investigates the value-relevance of group-affiliated companies using a sample of Chinese private listed companies. We find that the value-relevance of earnings for the affiliated companies is negatively related to the relative strength of the business groups, and a higher operating risk of the affiliated companies may weaken the negative relationship. Moreover, a stronger relative strength of the business groups may reduce the likelihood of the affiliated companies’ future stock price crashes. Overall, our results suggest that low value-relevance of earnings for group-affiliated companies may not be indicative of low accounting information quality.

Suggested Citation

  • Xiang, Jiafeng & Sheng, Zhiyun, 2024. "Relative strength of business groups and the value-relevance of earnings for group-affiliated companies," Finance Research Letters, Elsevier, vol. 63(C).
    • Handle: RePEc:eee:finlet:v:63:y:2024:i:c:s1544612324003507
    DOI: 10.1016/j.frl.2024.105320
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    References listed on IDEAS

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