Regional heterogeneity among non-operating earnings quality, stock returns, and firm value in biotech industry
This paper analyses regional heterogeneity under the discretionary measures of non-operating earnings quality and stock returns on firm value in Taiwan’s biotech industry during 2008–2015. An econometric framework based on panel smooth transition regression models is employed in a non-linear panel data model. The results show that biotech firms near the bottom threshold for operating income have low-quality non-operating earnings and those near the upper threshold demonstrate the opposite. Investors who exclusively focus on stock returns are thus likely to miss important information about the quality of earnings.
biotech industry; firm value; non-operating earnings; panel smooth transition regression (PSTR) models; regional heterogeneity; stock returns
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