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Corporate Diversification and the Price-Earnings Association

In: Advances In Quantitative Analysis Of Finance And Accounting

Author

Listed:
  • Ben-Hsien Bao

    (Hong Kong Polytechnic University, Hong Kong, China)

  • Da-Hsien Bao

    (Rowan University, USA)

Abstract

This study investigates the effect of diversification on the association between firm value and earnings using both the levels and the changes analyses. Results show that: (1) the association between stock price and earnings for diversified firms is higher than that for focused firms, (2) the association is stronger when degree of diversification is higher, and (3) the association is improved significantly when quality of earnings is also considered.

Suggested Citation

  • Ben-Hsien Bao & Da-Hsien Bao, 2006. "Corporate Diversification and the Price-Earnings Association," World Scientific Book Chapters, in: Cheng-Few Lee (ed.), Advances In Quantitative Analysis Of Finance And Accounting, chapter 13, pages 299-326, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812772824_0013
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