CEO Social Capital and the Value Relevance of Accounting Metrics
Abstract
:1. Introduction
2. Literature Review and Hypotheses Development
2.1. CEO Social Capital and Firm Outcomes
2.2. CEO Social Capital and Value Relevance
2.3. The Ohlson (1995) Model and the Residual Income Model
2.4. Hypotheses Development
3. Sample Construction, Variables Description, and Research Methodology
3.1. Sample Construction
3.2. CEO Social Capital/Network Centrality
3.3. Summary Statistics and Correlation Matrix
3.4. Research Methodology
4. Empirical Results
4.1. CEO Social Capital and the Value Relevance of Accounting Metrics
4.1.1. OLS Regressions
4.1.2. The Use of Other Proxies for Equity Price
4.1.3. The Use of Other Proxies for Earnings Metrics
4.1.4. CEO Social Capital and the Value Relevance of Accounting Metrics: Second-Order Effects
4.1.5. Controlling for Firm Human Capital
4.1.6. Endogeneity Concerns
4.2. CEO Social Capital and the Value Relevance of Accounting Metrics in High-Tech Related Industries
4.3. Additional Analysis: Information vs. Reputation Channels
5. Conclusions
Author Contributions
Funding
Data Availability Statement
Acknowledgments
Conflicts of Interest
Appendix A. Variable Description
Variables | Descriptions |
Dependent Variables: | |
Pricethree | Market price of the common equity at the end of three months after fiscal year end of year t |
Pricetwo | Market price of the common equity at the end of two months after fiscal year end of year t |
Priceone | Market price of the common equity the end of one month after fiscal year end of year t |
Priceyear-end | Market price of the common equity right at fiscal year-end of year t |
Variables of interest: CEO Social Capital Measurement | |
Degree | Number of direct ties with others in the network |
Eigen | Connection to “connected” people in the network |
PCA | Principal Component of percentile value of Degree and Eigen centrality measures |
Reputation channel | The predicted value generated by regressing the raw CEO social capital data on a vector of plausible variables of firm and personal CEO characteristics that are likely to be correlated with our CEO social capital measures |
Information channel | The residual value generated by regressing the raw CEO social capital data on a vector of plausible variables of firm and personal CEO characteristics that are likely to be correlated with our CEO social capital measures |
Variables of interest: Others | |
Book value per share | Common equity scaled by number of shares outstanding in year t |
Earnings per share | Net income scaled by number of shares outstanding in year t |
Op earnings per share | Operating income scaled by number of shares outstanding in year t |
Cash flow per share | Cash flow from operating activities scaled by number of shares outstanding in year t |
Accruals per share | The difference between net income and cash flow from operating activities scaled by the number of shares outstanding in year t |
Exclusions per share | The difference between net income and operating income scaled by the number of shares outstanding in year t |
Control Variables: | |
Size | Firm size at year t (natural log of one plus book value of assets) |
ROA_std | Rolling standard deviation of ROA for past three years including current year |
Leverage | One measurement of leverage (at year t), as total current and long-term debt scaled by total asset |
Sales growth | Current year sales growth rate: calculated by the difference in sales amounts between the current and previous year scaled by the total sales amounts last year |
Op loss | Indicator variable equals to 1 if the firm incurs an operational loss in year t, 0 otherwise |
Big4 | Indicator variable equals to 1 if a firm uses Big 4 auditors, 0 otherwise |
Duality | Indicator variable equals to 1 if the CEO also serves as the board director |
Tenure | Natural log of 1 plus years that the person serves as CEO in a firm |
Others: | |
year | Used to control for year fixed effect |
ff48 | Fama and French (1997) classifications of 48 industries, used to control for industry fixed effect |
1 | As CEO social capital is a valuable non-physical resource of a firm that can potentially bring future benefits to the firm, we believe that it qualifies as an intangible asset under traditional accounting standards. However, since CEO social capital is not currently recorded under traditional accounting standards, we also believe that (similar to the unrecorded value of the overall workforce of a firm) CEO social capital qualifies as an unrecorded intangible asset of a firm. |
2 | For example, investors need to be able to predict future operating results based on accounting metrics measured under traditional accounting standards. |
3 | The first model version expressed is normally referred to as the dividend discounted model and the second model version expressed is normally referred to as the free cash flow model. If a company pays out all of its free cash flows to the equity shareholders as dividends, then the free cash flow model is equivalent to the dividend discounted model. |
4 | Skogsvik and Skogsvik (2010, note 2) attribute the theory underpinning the residual income model to Preinreich (1938, formula (57)). |
5 | The Ohlson model is sometimes referred to as the price model (e.g., Barth et al. 2001). While we address the existence of the return model (Ball and Brown 1968; Easton 1999; Kothari and Zimmerman 1995), the return model primarily focuses on the explanation power of equity return based on the change in earnings metrics and does not incorporate the book value of equity in the regression model. Additionally, the literature (e.g., Kothari and Zimmerman 1995) indicates that the price model can better measure the incremental effect of accounting metrics on equity price. Thus, we prefer to use the price model as it allows us to fully test our hypotheses (in contrast to the return model). |
6 | Our value relevance test assumes market efficiency to the extent that the equity price has incorporated a certain amount of public and/or private information There are three forms of efficient market hypotheses: weak form, semi-strong form and strong form. Similar to the residual income framework, the Ohlson model assumes (at a minimum) the semi-strong form of efficient market, which assumes that the equity price reflects (at a minimum) all currently available information. |
7 | According to the Ohlson (1995) model, as well as the framework underpinning the residual income model, the book value of equity serves as the floor value for a company’s equity value, whereas the portion from earnings represents an addition to the floor of the book value. Thus, if CEOs with higher social capital can extract rents at the expense of the investors at a lower cost than their less-connected peers and, in turn, the financial health of the firm deteriorates, then investors would be hesitant to rely on earnings and assign additional value for the firm; therefore, the value of the firms would likely deteriorate. Admittedly, although the book value of the equity does not account for CEO social capital, the lower equity value leads to a closer relationship with the floor value; that is, the book value of equity. |
8 | We argue that since CEOs with higher social capital are more “visible” to market participants, such participants will more heavily depend on the information obtained through CEO social capital channels; that is, market participants will form their evaluation of firm value based on the information they possess. In essence, a participant’s increased reliance on such information will also increase their reliance on accounting metrics (via a spillover effect) to estimate the value of a firm. |
9 | Given that our purpose is to examine the effect of CEO social capital on the value relevance of the book value per share of equity and earnings per share, we initially interact the percentile value of CEO social capital with the variables of interest in the Ohlson (1995) model; however, using the percentile values causes a multicollinearity issue for the regression. Thus, to address multicollinearity, we divided our sample into high and low social capital groups. |
10 | In an untabulated analysis, we also employed an alternative method by including an indicator variable of “high social capital” and interacted that indicator variable with the variables of interest in the regression based on the entire sample and the results hold. |
11 | In an untabulated analysis, we also included the interaction terms between the control variables and the variables of interest in the regression; however, including the interaction terms caused severe multicollinearity issues, especially for the interaction terms between firm size and the variables of interest. Thus, the primary results in the study were determined from the regressions without the interaction term between control variables and the variables of interest. Importantly, the results remain the same with the inclusion of the interaction terms between the control variables and the variables of interest, except for firm size. |
12 | To check for the robustness of our results, we used different proxies for future price in the regression. |
13 | The regression results are similar without including the control variables in the regression. |
14 | In an untabulated analysis, we also employed High MTB and High R&D groups by using the medium value of MTB and R&D expenditures by each industry defined by a two-digit SIC code for each year and then reran the regressions obtaining similar results. |
15 | For the regression related to High Tech, we only included a subsample of relevant firm-year observations within the SIC codes defined by Francis and Schipper (1999). |
16 | The results stayed the same with the inclusion of the interaction terms between control variables and the variables of interest, except for firm size (since the inclusion of interaction term between firm size and the variables of interest causes a severe multicollinearity issue). |
17 | Given that the mean market price of the common equity is 23.55, the 2.4% decrease is calculated as −0.554/23.55, whereas the 6.4% increase is calculated as 1.506/23.55. |
18 | The average marginal effect of the Book value per share and Earnings per share is about 1.612 and 1.453, respectively. |
19 | The results stayed the same with the inclusion of the interaction terms between control variables and variables of interest, except for firm size (since the inclusion of interaction term between firm size and the variables of interest causes a severe multicollinearity issue). |
20 | We performed an untabulated analysis similar to the analysis carried out for Table 3 and obtained similar results. |
21 | In addition, the results of an untabulated analysis indicate that the positive and significant relationship arises from the difference between op earnings per share and cash flow per share. |
22 | Employing accounting metrics specifically measured under traditional financial accounting standards, the differences between operating income and net income are considered nonrecurring adjustments, while differences between operating income and cash flow from operating activities are considered recurring adjustments. |
23 | We used an alternative method to define industry categories based on the Fama and French (1997) industry classifications and obtained similar results. |
24 | We employed the C_score (without the G_score) to measure accounting conservatism and obtain similar results. |
25 | We thank the anonymous reviewer who suggested that we test whether the effect of CEO social capital on the value relevance of accounting metrics persists across profitable and unprofitable firms. |
26 | The data for managerial ability was obtained from: https://peterdemerjian.weebly.com/managerialability.html (accessed on 25 March 2023). |
27 | The result does not change with the inclusion of the interaction terms between managerial ability and the variables of interest. |
28 | The negative (positive) effect of CEO social capital on the value relevance of the book value of equity (earnings) is diminished in the low-tech subsample, except for the differences for the coefficient of earnings per share between columns (7) and (8) of Panel A, which remained positive and marginally significant (p < 0.1). Nevertheless, compared with the corresponding values in the high-tech subsample, that is, the differences for the coefficient of earnings per share between columns (5) and (6), the magnitude is much smaller in the low-tech subsample. |
29 | The 8.1% increase in High MTB group was calculated as 1.918/23.55 and the 0.1% decrease in non-High MTB group was calculated as 0.033/23.55. |
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Variables | N | Mean | Sd | P25 | P50 | P75 |
---|---|---|---|---|---|---|
Dependent Variables | ||||||
Pricethree | 20,691 | 23.55 | 29.29 | 5.60 | 14.00 | 29.45 |
Pricetwo | 20,691 | 23.24 | 29.12 | 5.50 | 13.82 | 28.72 |
Priceone | 20,691 | 23.10 | 28.80 | 5.66 | 13.90 | 28.83 |
Priceyear-end | 20,691 | 24.57 | 40.40 | 5.62 | 14.03 | 28.93 |
Variables of Interest | ||||||
Degree | 20,691 | 65.12 | 16.66 | 52.00 | 64.00 | 78.00 |
Eigen | 20,691 | 58.02 | 22.39 | 41.00 | 60.00 | 76.00 |
PCA | 20,691 | 0.00 | 1.32 | −0.99 | −0.03 | 1.02 |
Book value per share | 20,691 | 8.39 | 9.69 | 2.24 | 5.54 | 11.21 |
Earnings per share | 20,691 | 0.28 | 2.65 | −0.37 | 0.32 | 1.26 |
Op earnings per share | 20,691 | 1.28 | 2.73 | −0.12 | 0.74 | 2.32 |
Cash flow per share | 20,691 | 1.56 | 2.84 | 0.05 | 0.92 | 2.45 |
Accruals per share | 20,691 | −1.28 | 2.70 | −1.64 | −0.61 | −0.12 |
Exclusions per share | 20,691 | −1.00 | 1.93 | −1.32 | −0.46 | −0.06 |
Controlled Variables | ||||||
Size | 20,691 | 19.70 | 2.03 | 18.27 | 19.61 | 21.09 |
ROA sd | 20,691 | 0.19 | 0.88 | 0.02 | 0.05 | 0.13 |
Leverage | 20,691 | 0.22 | 0.27 | 0.01 | 0.17 | 0.34 |
Sales growth | 20,691 | 3.22 | 267.28 | −0.03 | 0.08 | 0.22 |
Op loss | 20,691 | 0.36 | 0.48 | 0.00 | 0.00 | 1.00 |
Big4 | 20,691 | 0.53 | 0.50 | 0.00 | 1.00 | 1.00 |
Duality | 20,691 | 0.40 | 0.49 | 0.00 | 0.00 | 1.00 |
Tenure | 20,691 | 1.32 | 0.89 | 0.69 | 1.39 | 1.95 |
(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | (10) | (11) | (12) | (13) | ||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(1) | Pricethree | 1 | ||||||||||||
(2) | Pricetwo | 0.9924 | 1 | |||||||||||
0.00 | ||||||||||||||
(3) | Priceone | 0.9835 | 0.9897 | 1 | ||||||||||
0.00 | 0.00 | |||||||||||||
(4) | Priceyear-end | 0.8804 | 0.8862 | 0.8974 | 1 | |||||||||
0.00 | 0.00 | 0.00 | ||||||||||||
(5) | Degree | 0.2757 | 0.2708 | 0.2708 | 0.2013 | 1 | ||||||||
0.00 | 0.00 | 0.00 | 0.00 | |||||||||||
(6) | Eigen | 0.2178 | 0.2142 | 0.2138 | 0.162 | 0.7343 | 1 | |||||||
0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||
(7) | PCA | 0.265 | 0.2604 | 0.2602 | 0.1951 | 0.9312 | 0.9312 | 1 | ||||||
0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||
(8) | Book value per share | 0.6498 | 0.647 | 0.6557 | 0.6129 | 0.237 | 0.192 | 0.2303 | 1 | |||||
0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||
(9) | Earnings per share | 0.352 | 0.3447 | 0.337 | 0.2579 | 0.1236 | 0.0938 | 0.1167 | 0.2886 | 1 | ||||
0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||
(10) | Op earnings per share | 0.5489 | 0.5403 | 0.5381 | 0.4459 | 0.2563 | 0.2037 | 0.247 | 0.4947 | 0.7443 | 1 | |||
0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||
(11) | Cash flow per share | 0.5681 | 0.5569 | 0.5571 | 0.4899 | 0.2636 | 0.2116 | 0.2552 | 0.5536 | 0.5174 | 0.7724 | 1 | ||
0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||
(12) | Accruals per share | −0.2534 | −0.2486 | −0.2565 | −0.2631 | −0.1564 | −0.1309 | −0.1543 | −0.3001 | 0.4344 | −0.0843 | −0.546 | 1 | |
0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||
(13) | Exclusions per share | −0.2959 | −0.2936 | −0.3011 | −0.2788 | −0.1941 | −0.1604 | −0.1903 | −0.306 | 0.317 | −0.3974 | −0.386 | 0.7167 | 1 |
0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
Dependent Variable: Pricethree | Entire Sample | Degree | Eigen | PCA | ||||||
---|---|---|---|---|---|---|---|---|---|---|
High | Low | Difference | High | Low | Difference | High | Low | Difference | ||
(1) | (2) | (3) | (2)–(3) | (4) | (5) | (4)–(5) | (6) | (7) | (6)–(7) | |
Book value per share | 1.612 *** | 1.380 *** | 1.934 *** | −0.554 *** | 1.371 *** | 1.913 *** | −0.542 *** | 1.404 *** | 1.914 *** | −0.51 *** |
(41.13) | (28.23) | (30.89) | (29.25) | (31.78) | (29.48) | (30.05) | ||||
Earnings per share | 1.453 *** | 2.052 *** | 0.546 ** | 1.506 *** | 2.221 *** | 0.479 ** | 1.742 *** | 2.039 *** | 0.594 ** | 1.445 *** |
(9.12) | (9.63) | (2.34) | (10.77) | (2.11) | (9.83) | (2.48) | ||||
Size | 2.642 *** | 3.506 *** | 1.096 *** | 3.516 *** | 1.287 *** | 3.489 *** | 1.225 *** | |||
(22.14) | (19.13) | (6.24) | (21.13) | (7.64) | (19.99) | (6.93) | ||||
ROA sd | 0.106 | −0.181 | 0.363 * | −0.134 | 0.121 | −0.139 | 0.354 * | |||
(0.69) | (−0.88) | (1.82) | (−0.59) | (0.63) | (−0.69) | (1.74) | ||||
Leverage | 4.707 *** | 3.832 *** | 5.035 *** | 4.279 *** | 5.083 *** | 3.898 *** | 4.933 *** | |||
(7.72) | (3.29) | (7.96) | (3.87) | (7.53) | (3.42) | (7.51) | ||||
Sales Growth | 1.278 *** | 1.581 *** | 1.224 *** | 1.695 *** | 1.192 *** | 1.490 *** | 1.279 *** | |||
(4.77) | (3.49) | (4.18) | (3.79) | (4.05) | (3.49) | (4.15) | ||||
Op loss | −1.798 *** | −1.215 * | −2.852 *** | −0.250 | −3.287 *** | −0.983 | −2.820 *** | |||
(−4.47) | (−1.81) | (−5.94) | (−0.40) | (−6.52) | (−1.54) | (−5.58) | ||||
Big4 | −0.119 | −1.178 ** | 1.521 *** | −0.668 | 1.012 *** | −1.166 ** | 1.605 *** | |||
(−0.38) | (−2.41) | (4.07) | (−1.36) | (2.69) | (−2.40) | (4.27) | ||||
Duality | 0.385 | 1.167 ** | −0.345 | 1.365 *** | −0.694 * | 1.346 *** | −0.643 * | |||
(1.29) | (2.52) | (−0.93) | (2.93) | (−1.95) | (2.96) | (−1.76) | ||||
Tenure | 1.132 *** | 1.237 *** | 0.967 *** | 1.391 *** | 0.901 *** | 1.209 *** | 1.032 *** | |||
(6.86) | (4.74) | (4.80) | (5.13) | (4.75) | (4.65) | (5.16) | ||||
_cons | −58.75 *** | −71.15 *** | −32.99 *** | −73.36 *** | −33.71 *** | −71.13 *** | −35.42 *** | |||
(−20.43) | (−16.42) | (−7.41) | (−17.50) | (−7.63) | (−17.22) | (−7.62) | ||||
N | 20,691 | 10,122 | 10,569 | 10,009 | 10,682 | 10,337 | 10,354 | |||
adj. R-sq | 0.530 | 52.6% | 51.7% | 0.9% | 53.2% | 52.6% | 0.6% | 53% | 51.4% | 1.6% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
Panel A. Equity Price at Two-Month after Fiscal Year-End (Pricetwo) as Dependent Variable | ||||||||||
Dependent Variable: Pricetwo | Entire Sample | Degree | Eigen | PCA | ||||||
High | Low | Difference | High | Low | Difference | High | Low | Difference | ||
(1) | (2) | (3) | (2)–(3) | (4) | (5) | (4)–(5) | (6) | (7) | (6)–(7) | |
Book value per share | 1.609 *** | 1.370 *** | 1.941 *** | −0.571 *** | 1.357 *** | 1.926 *** | −0.569 *** | 1.390 *** | 1.929 *** | −0.539 *** |
(41.13) | (28.26) | (31.04) | (29.21) | (32.11) | (29.43) | (30.42) | ||||
Earnings per share | 1.408 *** | 2.030 *** | 0.478 ** | 1.552 *** | 2.192 *** | 0.429 * | 1.763 *** | 2.001 *** | 0.556 ** | 1.445 *** |
(8.81) | (9.54) | (2.04) | (10.68) | (1.88) | (9.67) | (2.32) | ||||
N | 20,691 | 10,122 | 10,569 | 10,009 | 10,682 | 10,337 | 10,354 | |||
adj. R-sq | 52.6% | 52.3% | 51.4% | 0.9% | 52.9% | 52.1% | 0.8% | 52.6% | 51.1% | 1.5% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |||
Controlled Variables Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |||
Panel B. Equity Price at One-Month after Fiscal Year-End (Priceone) as Dependent Variable | ||||||||||
Dependent Variable: Priceone | Entire Sample | Degree | Eigen | PCA | ||||||
High | Low | Difference | High | Low | Difference | High | Low | Difference | ||
(1) | (2) | (3) | (2)–(3) | (4) | (5) | (4)–(5) | (6) | (7) | (6)–(7) | |
Book value per share | 1.631 *** | 1.402 *** | 1.952 *** | −0.55 *** | 1.386 *** | 1.942 *** | −0.556 *** | 1.419 *** | 1.945 *** | −0.526 *** |
(41.28) | (28.26) | (31.07) | (28.96) | (32.11) | (29.40) | (30.40) | ||||
Earnings per share | 1.279 *** | 1.879 *** | 0.374 | 1.505 *** | 2.028 *** | 0.345 | 1.683 *** | 1.837 *** | 0.478 * | 1.396 *** |
(7.86) | (8.60) | (1.56) | (9.56) | (1.48) | (8.64) | (1.95) | ||||
N | 20,691 | 10,122 | 10,569 | 10,009 | 10,682 | 10,337 | 10,354 | |||
adj. R-sq | 53.1% | 52.3% | 52.8% | −0.5% | 0.530 | 0.534 | −0.4% | 0.526 | 0.525 | 0.1% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |||
Controlled Variables Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |||
Panel C. Equity Price at Fiscal Year-End (Priceyear-end) as Dependent Variable | ||||||||||
Dependent Variable: Priceyear-end | Entire Sample | Degree | Eigen | PCA | ||||||
High | Low | Difference | High | Low | Difference | High | Low | Difference | ||
(1) | (2) | (3) | (2)–(3) | (4) | (5) | (4)–(5) | (6) | (7) | (6)–(7) | |
Book Value per share | 2.397 *** | 1.987 *** | 3.028 *** | −1.041 *** | 1.982 *** | 2.969 *** | −0.987 *** | 2.009 *** | 3.045 *** | −1.036 *** |
(23.94) | (17.03) | (17.18) | (17.28) | (17.58) | (17.47) | (16.88) | ||||
Earnings per share | 1.200 *** | 1.914 *** | 0.364 | 1.55 *** | 2.117 *** | 0.257 | 1.86 *** | 1.745 *** | 0.691 | 1.054 *** |
(3.59) | (4.37) | (0.72) | (5.03) | (0.52) | (4.04) | (1.36) | ||||
N | 20,691 | 10,122 | 10,569 | 10,009 | 10,682 | 10,337 | 10,354 | |||
adj. R-sq | 42.7% | 40.3% | 46.4% | −6.1% | 41.2% | 46.3% | −5.1% | 40.5% | 46.3% | −5.8% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |||
Controlled Variables Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
Panel A. CEO Social Capital, Op Earnings per Share, and Its Adjustments from Earnings per Share | ||||||||||
Dependent Variable: Pricethree | Entire Sample | Degree | Eigen | PCA | ||||||
High | Low | Difference | High | Low | Difference | High | Low | Difference | ||
(1) | (2) | (3) | (2)–(3) | (4) | (5) | (4)–(5) | (6) | (7) | (6)–(7) | |
Book value per share | 1.415 *** | 1.127 *** | 1.826 *** | −0.699 *** | 1.115 *** | 1.806 *** | −0.691 *** | 1.153 *** | 1.806 *** | −0.653 *** |
(32.77) | (20.90) | (27.14) | (22.62) | (27.09) | (22.50) | (25.94) | ||||
Op earnings per share | 2.994 *** | 3.613 *** | 2.096 *** | 1.517 *** | 3.768 *** | 1.975 *** | 1.793 *** | 3.598 *** | 2.105 *** | 1.493 *** |
(17.68) | (16.41) | (8.11) | (17.46) | (7.89) | (16.85) | (7.90) | ||||
N | 20,691 | 10,122 | 10,569 | 10,009 | 10,682 | 10,337 | 10,354 | |||
adj. R-sq | 55.8% | 56.1% | 53.5% | 2.6% | 56.8% | 54.2% | 2.6% | 56.5% | 53.2% | 3.3% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |||
Controlled Variables Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |||
Panel A (Continued) | ||||||||||
Dependent Variable: Pricethree | Entire Sample | Degree | Eigen | PCA | ||||||
High | Low | Difference | High | Low | Difference | High | Low | Difference | ||
(8) | (9) | (10) | (9)–(10) | (11) | (12) | (11)–(12) | (13) | (14) | (13)–(14) | |
Book value per share | 1.399 *** | 1.126 *** | 1.761 *** | −0.635 *** | 1.117 *** | 1.736 *** | −0.619 *** | 1.152 *** | 1.738 *** | −0.586 *** |
(33.58) | (21.23) | (27.68) | (22.79) | (28.03) | (22.77) | (26.59) | ||||
Op earnings per share | 2.817 *** | 3.602 *** | 1.783 *** | 1.819 *** | 3.809 *** | 1.652 *** | 2.157 *** | 3.586 *** | 1.814 *** | 1.772 *** |
(14.95) | (14.09) | (6.58) | (15.46) | (6.30) | (14.52) | (6.51) | ||||
Exclusions per share | −0.612 *** | −0.0304 | −1.553 *** | 1.523 *** | 0.114 | −1.579 *** | 1.693 *** | −0.0319 | −1.524 *** | 1.492 *** |
(−3.70) | (−0.14) | (−6.02) | (0.55) | (−6.24) | (−0.15) | (−5.69) | ||||
N | 20,691 | 10,122 | 10,569 | 10,009 | 10,682 | 10,337 | 10,354 | |||
adj. R-sq | 55.90% | 56.1% | 54.2% | 1.9% | 56.8% | 54.9% | 1.9% | 0.565 | 0.538 | 2.7% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |||
Controlled Variables Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |||
Panel B. CEO Social Capital, Cash Flow per Share, and Its Adjustments from Earnings per Share | ||||||||||
Dependent Variable: Pricethree | Entire Sample | Degree | Eigen | PCA | ||||||
High | Low | Difference | High | Low | Difference | High | Low | Difference | ||
(1) | (2) | (3) | (2)–(3) | (4) | (5) | (4)–(5) | (6) | (7) | (6)–(7) | |
Book value per share | 1.353 *** | 1.045 *** | 1.796 *** | −0.751 *** | 1.069 *** | 1.740 *** | −0.671 *** | 1.110 *** | 1.734 *** | −0.624 *** |
(30.99) | (20.01) | (25.97) | (21.00) | (25.51) | (21.26) | (24.25) | ||||
Cash flow per share | 2.650 *** | 3.382 *** | 1.562 *** | 1.82 *** | 3.228 *** | 1.859 *** | 1.369 *** | 3.107 *** | 1.915 *** | 1.192 *** |
(17.46) | (17.26) | (6.99) | (16.21) | (8.45) | (15.88) | (8.19) | ||||
N | 20,691 | 10,122 | 10,569 | 10,009 | 10,682 | 10,337 | 10,354 | |||
adj. R-sq | 0.554 | 56.3% | 52.8% | 3.5% | 56.1% | 54.2% | 1.9% | 55.9% | 53.1% | 2.8% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |||
Controlled Variables Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |||
Panel B (Continued) | ||||||||||
Dependent Variable: Pricethree | Entire Sample | Degree | Eigen | PCA | ||||||
High | Low | Difference | High | Low | Difference | High | Low | Difference | ||
(8) | (9) | (10) | (9)–(10) | (11) | (12) | (11)–(12) | (13) | (14) | (13)–(14) | |
Book value per share | 1.360 *** | 1.042 *** | 1.793 *** | −0.751 *** | 1.054 *** | 1.721 *** | −0.667 *** | 1.100 *** | 1.721 *** | −0.621 *** |
(31.17) | (19.64) | (26.93) | (21.00) | (26.94) | (20.85) | (25.57) | ||||
Cash flow per share | 3.007 *** | 4.086 *** | 1.520 *** | 2.566 *** | 4.204 *** | 1.638 *** | 2.566 *** | 3.947 *** | 1.765 *** | 2.182 *** |
(15.17) | (16.27) | (5.21) | (17.33) | (5.81) | (15.86) | (5.94) | ||||
Accruals per share | 0.565 *** | 1.032 *** | −0.0716 | 1.104 *** | 1.367 *** | −0.415 * | 1.782 *** | 1.183 *** | −0.284 | 1.467 *** |
(3.57) | (5.01) | (−0.30) | (6.72) | (−1.87) | (5.79) | (−1.18) | ||||
N | 20,691 | 10,122 | 10,569 | 10,009 | 10,682 | 10,337 | 10,354 | |||
adj. R-sq | 0.556 | 56.7% | 52.8% | 3.9% | 56.9% | 54.3% | 2.6% | 56.5% | 53.1% | 3.4% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes | |||
Controlled Variables Included | Yes | Yes | Yes | Yes | Yes | Yes | Yes |
Panel A. Conditioning on Earnings Quality | ||||||
Dependent Variable: Pricethree | High Earnings Quality | Low Earnings Quality | ||||
High Degree | Low Degree | Difference | High Degree | Low Degree | Difference | |
(1) | (2) | (1)–(2) | (3) | (4) | (3)–(4) | |
Book value per share | 1.319 *** | 1.836 *** | −0.517 *** | 1.274 *** | 1.730 *** | −0.456 *** |
(19.05) | (19.45) | (14.69) | (17.46) | |||
Earnings per share | 3.524 *** | 2.284 *** | 1.24 *** | 0.876 *** | 0.0868 | 0.789 ** |
(8.46) | (4.92) | (3.25) | (0.29) | |||
N | 5379 | 4265 | 3769 | 5309 | ||
adj. R-sq | 58.3% | 60.7% | −2.4% | 44.5% | 41.9% | 2.6% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Controlled Variables Included | Yes | Yes | Yes | Yes | ||
Panel A (Continued) | ||||||
Dependent Variable: Pricethree | High Earnings Quality | Low Earnings Quality | ||||
High Eigen | Low Eigen | Difference | High Eigen | Low Eigen | Difference | |
(5) | (6) | (5)–(6) | (7) | (8) | (7)–(8) | |
Book value per share | 1.367 *** | 1.724 *** | −0.357 ** | 1.192 *** | 1.768 *** | −0.576 *** |
(20.20) | (18.36) | (14.63) | (18.73) | |||
Earnings per share | 3.452 *** | 2.497 *** | 0.955 ** | 1.229 *** | −0.149 | 1.378 *** |
(8.61) | (5.27) | (4.65) | (−0.52) | |||
N | 5234 | 4410 | 3874 | 5204 | ||
adj. R-sq | 58.6% | 60.6% | −2% | 44.2% | 44.9% | −0.7% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Controlled Variables Included | Yes | Yes | Yes | Yes | ||
Panel A (Continued) | ||||||
Dependent Variable: Pricethree | High Earnings Quality | Low Earnings Quality | ||||
High PCA | Low PCA | Difference | High PCA | Low PCA | Difference | |
(9) | (10) | (9)–(10) | (11) | (12) | (11)–(12) | |
Book value per share | 1.348 *** | 1.803 *** | −0.455 *** | 1.298 *** | 1.697 *** | −0.399 *** |
(20.29) | (18.24) | (15.28) | (17.21) | |||
Earnings per share | 3.445 *** | 2.436 *** | 1.009 ** | 0.941 *** | 0.0355 | 0.906 ** |
(8.67) | (4.99) | (3.55) | (0.12) | |||
N | 5507 | 4137 | 3889 | 5189 | ||
adj. R-sq | 58.6% | 60.7% | −2.1% | 44.3% | 42.2% | 2.1% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Controlled Variables Included | Yes | Yes | Yes | Yes | ||
Panel B. Conditioning on Accounting Conservatism | ||||||
Dependent Variable: Pricethree | High Accounting Conservatism | Low Accounting Conservatism | ||||
High Degree | Low Degree | Difference | High Degree | Low Degree | Difference | |
(1) | (2) | (1)–(2) | (3) | (4) | (3)–(4) | |
Book value per share | 1.607 *** | 2.232 *** | −0.625 *** | 0.959 *** | 1.533 *** | −0.574 *** |
(20.26) | (27.34) | (17.97) | (17.44) | |||
Earnings per share | 3.011 *** | 0.427 | 2.584 *** | 1.028 *** | 0.419 * | 0.609 ** |
(6.21) | (0.93) | (5.09) | (1.72) | |||
N | 5106 | 4609 | 4646 | 5650 | ||
adj. R-sq | 58.5% | 61.3% | −2.8% | 42.3% | 42.4% | −0.1% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Controlled Variables Included | Yes | Yes | Yes | Yes | ||
Panel B (Continued) | ||||||
Dependent Variable: Pricethree | High Accounting Conservatism | Low Accounting Conservatism | ||||
High Degree | Low Degree | Difference | High Degree | Low Degree | Difference | |
(5) | (6) | (5)–(6) | (7) | (8) | (7)–(8) | |
Book value per share | 1.494 *** | 2.231 *** | −0.737 *** | 1.044 *** | 1.410 *** | −0.366 ** |
(19.06) | (29.99) | (18.52) | (16.34) | |||
Earnings per share | 3.724 *** | 0.376 | 3.348 *** | 1.003 *** | 0.440 * | 0.563 ** |
(7.33) | (0.92) | (5.00) | (1.85) | |||
N | 4914 | 4801 | 4768 | 5528 | ||
adj. R-sq | 59.9% | 62.3% | −2.4% | 43.3% | 41% | 2.3% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Controlled Variables Included | Yes | Yes | Yes | Yes | ||
Panel B (Continued) | ||||||
Dependent Variable: Pricethree | High Accounting Conservatism | Low Accounting Conservatism | ||||
High Degree | Low Degree | Difference | High Degree | Low Degree | Difference | |
(9) | (10) | (9)–(10) | (11) | (12) | (11)–(12) | |
Book value per share | 1.574 *** | 2.248 *** | −0.674 *** | 1.049 *** | 1.428 *** | −0.379 *** |
(19.97) | (27.99) | (18.73) | (15.84) | |||
Earnings per share | 3.262 *** | 0.417 | 2.845 *** | 0.899 *** | 0.581 ** | 0.309 ** |
(6.71) | (0.92) | (4.45) | (2.36) | |||
N | 5140 | 4575 | 4837 | 5459 | ||
adj. R-sq | 59.2% | 61.1% | −1.9% | 42.6% | 41.1% | 1.5% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Controlled Variables Included | Yes | Yes | Yes | Yes | ||
Panel C. Conditioning on Investment Efficiency | ||||||
Dependent Variable: Pricethree | High Investment Efficiency | Low Investment Efficiency | ||||
High Degree | Low Degree | Difference | High Degree | Low Degree | Difference | |
(1) | (2) | (1)–(2) | (3) | (4) | (3)–(4) | |
Book value per share | 1.501 *** | 2.032 *** | −0.531 *** | 1.291 *** | 1.903 *** | −0.612 *** |
(18.80) | (22.07) | (21.06) | (22.08) | |||
Earnings per share | 1.440 *** | −0.0146 | 1.455 *** | 2.362 *** | 1.153 *** | 1.209 *** |
(4.46) | (−0.04) | (8.27) | (3.71) | |||
N | 4597 | 4961 | 4974 | 5071 | ||
adj. R-sq | 52.20% | 49.60% | 2.6% | 54.70% | 56.10% | −1.4% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Controlled Variables Included | Yes | Yes | Yes | Yes | ||
Panel C (Continued) | ||||||
Dependent Variable: Pricethree | High Investment Efficiency | Low Investment Efficiency | ||||
High Degree | Low Degree | Difference | High Degree | Low Degree | Difference | |
(5) | (6) | (5)–(6) | (7) | (8) | (7)–(8) | |
Book value per share | 1.467 *** | 1.978 *** | −0.511 *** | 1.306 *** | 1.883 *** | −0.577 *** |
(19.83) | (22.69) | (20.73) | (22.97) | |||
Earnings per share | 1.934 *** | −0.315 | 2.249 *** | 2.373 *** | 1.323 *** | 1.05 *** |
(6.28) | (−0.92) | (8.35) | (4.47) | |||
N | 4504 | 5054 | 4945 | 5100 | ||
adj. R-sq | 53.40% | 50.10% | 3.3% | 54.20% | 58.50% | −4.3% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Controlled Variables Included | Yes | Yes | Yes | Yes | ||
Panel C (Continued) | ||||||
Dependent Variable: Pricethree | High Investment Efficiency | Low Investment Efficiency | ||||
High Degree | Low Degree | Difference | High Degree | Low Degree | Difference | |
(9) | (10) | (9)–(10) | (11) | (12) | (11)–(12) | |
Book value per share | 1.520 *** | 2.003 *** | −0.483 *** | 1.319 *** | 1.887 *** | −0.568 *** |
(19.81) | (21.68) | (21.35) | (21.70) | |||
Earnings per share | 1.578 *** | −0.117 | 1.695 *** | 2.309 *** | 1.356 *** | 0.953 *** |
(5.02) | (−0.32) | (8.23) | (4.33) | |||
N | 4677 | 4881 | 5087 | 4958 | ||
adj. R-sq | 52.90% | 48.70% | 4.2% | 54.50% | 57% | −2.5% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Controlled Variables Included | Yes | Yes | Yes | Yes |
Dependent Variable: Pricethree | Degree | Eigen | PCA | ||||||
---|---|---|---|---|---|---|---|---|---|
High | Low | Difference | High | Low | Difference | High | Low | Difference | |
(1) | (2) | (1)–(2) | (3) | (4) | (3)–(4) | (5) | (6) | (5)–(6) | |
Book value per share | 1.354 *** | 1.777 *** | −0.423 *** | 1.336 *** | 1.761 *** | −0.425 *** | 1.358 *** | 1.766 *** | −0.408 *** |
(25.87) | (28.91) | (27.17) | (28.78) | (27.63) | (27.36) | ||||
Earnings per share | 2.012 *** | 1.386 *** | 0.626 ** | 2.258 *** | 1.216 *** | 1.042 *** | 2.125 *** | 1.326 *** | 0.799 *** |
(8.62) | (6.41) | (10.04) | (5.68) | (9.40) | (5.94) | ||||
MA_SCORE | 10.74 *** | 5.050 *** | 8.862 *** | 7.349 *** | 9.651 *** | 6.427 *** | |||
(12.35) | (6.66) | (10.34) | (9.24) | (11.51) | (7.91) | ||||
N | 9308 | 9681 | 9190 | 9799 | 9490 | 9499 | |||
adj. R-sq | 53.2% | 53% | 0.2% | 53.8% | 53.7% | 0.1% | 53.8% | 52.5% | 1.3% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | Yes | Yes | |||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | Yes | Yes | |||
Controlled Variables Included | Yes | Yes | Yes | Yes | Yes | Yes |
Dependent Variable: Pricethree | Instrumented Degree | Instrumented Eigen | Instrumented PCA | ||||||
---|---|---|---|---|---|---|---|---|---|
High | Low | Difference | High | Low | Difference | High | Low | Difference | |
(1) | (2) | (1)–(2) | (3) | (4) | (3)–(4) | (5) | (6) | (5)–(6) | |
Book value per share | 1.346 *** | 1.945 *** | −0.599 *** | 1.392 *** | 1.889 *** | −0.497 *** | 1.374 *** | 1.920 *** | −0.546 *** |
(29.15) | (29.75) | (29.95) | (28.75) | (29.40) | (29.40) | ||||
Earnings per share | 2.240 *** | 0.242 | 1.998 *** | 2.166 *** | 0.267 | 1.899 *** | 2.159 *** | 0.291 | 1.868 *** |
(10.72) | (1.04) | (10.31) | (1.14) | (10.25) | (1.24) | ||||
N | 10,345 | 10,346 | 10,345 | 10,346 | 10,345 | 10,346 | |||
adj. R-sq | 50.9% | 51.8% | −0.9% | 0.515 | 0.504 | 1.1% | 0.511 | 0.511 | 0% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | Yes | Yes | |||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | Yes | Yes | |||
Controlled Variables Included | Yes | Yes | Yes | Yes | Yes | Yes |
Panel A. High-Tech Defined by Market-to-Book Equity Ratio | ||||||
Dependent Variable: Pricethree | High Market-to-Book Equity Ratio | Low Market-to-Book Equity Ratio | ||||
High Degree | Low Degree | Difference | High Degree | Low Degree | Difference | |
(1) | (2) | (1)–(2) | (3) | (4) | (3)–(4) | |
Book value per share | 2.567 *** | 3.111 *** | −0.544 *** | 1.324 *** | 1.220 *** | 0.104 |
(33.96) | (45.49) | (22.19) | (18.84) | |||
Earnings per share | 2.239 *** | 0.321 | 1.918 *** | 0.589 ** | 0.556 *** | 0.033 |
(6.98) | (0.98) | (2.43) | (2.82) | |||
N | 5297 | 5044 | 4582 | 5768 | ||
adj. R-sq | 70.2% | 68.5% | 1.7% | 60.1% | 57.8% | 2.3% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Controlled Variables Included | Yes | Yes | Yes | Yes | ||
Panel A (Continued) | ||||||
Dependent Variable: Pricethree | High Market-to-Book Equity Ratio | Low Market-to-Book Equity Ratio | ||||
High Eigen | Low Eigen | Difference | High Eigen | Low Eigen | Difference | |
(5) | (6) | (5)–(6) | (7) | (8) | (7)–(8) | |
Book value per share | 2.643 *** | 2.981 *** | −0.338 *** | 1.254 *** | 1.278 *** | −0.024 |
(34.33) | (47.65) | (23.07) | (19.21) | |||
Earnings per share | 2.196 *** | 0.450 | 2.646 *** | 0.846 *** | 0.290 | 0.556 * |
(6.53) | (1.49) | (3.67) | (1.38) | |||
N | 5181 | 5160 | 4722 | 5628 | ||
adj. R-sq | 69.4% | 69.1% | 0.3% | 60.9% | 58.4% | 2.5% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Controlled Variables Included | Yes | Yes | Yes | Yes | ||
Panel A (Continued) | ||||||
Dependent Variable: Pricethree | High Earnings Quality | Low Earnings Quality | ||||
High PCA | Low PCA | Difference | High PCA | Low PCA | Difference | |
(9) | (10) | (9)–(10) | (11) | (12) | (11)–(12) | |
Book value per share | 2.599 *** | 3.070 *** | −0.471 *** | 1.292 *** | 1.242 *** | 0.05 |
(34.75) | (45.75) | (22.87) | (18.64) | |||
Earnings per share | 2.229 *** | 0.386 | 1.843 *** | 0.760 *** | 0.376 * | 0.384 |
(6.83) | (1.22) | (3.18) | (1.91) | |||
N | 5355 | 4986 | 4695 | 5655 | ||
adj. R-sq | 70.1% | 68.2% | 1.9% | 60.7% | 57.6% | 3.1% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Controlled Variables Included | Yes | Yes | Yes | Yes | ||
Panel B. High-Tech Defined by High R&D Expenditures | ||||||
Dependent Variable: Pricethree | High R&D Expenditures | Low R&D Expenditures | ||||
High Degree | Low Degree | Difference | High Degree | Low Degree | Difference | |
(1) | (2) | (1)–(2) | (3) | (4) | (3)–(4) | |
Book value per share | 1.641 *** | 2.154 *** | −0.513 *** | 1.316 *** | 1.503 *** | 0.187 |
(22.86) | (23.14) | (19.25) | (20.36) | |||
Earnings per share | 1.896 *** | −0.420 | 2.316 *** | 1.979 *** | 2.354 *** | −0.375 |
(6.80) | (−1.28) | (6.09) | (8.48) | |||
N | 5327 | 5009 | 4552 | 5803 | ||
adj. R-sq | 60.1% | 52.4% | 7.7% | 50.6% | 54.8% | −4.2% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Controlled Variables Included | Yes | Yes | Yes | Yes | ||
Panel B (Continued) | ||||||
Dependent Variable: Pricethree | High R&D Expenditures | Low R&D Expenditures | ||||
High Eigen | Low Eigen | Difference | High Eigen | Low Eigen | Difference | |
(5) | (6) | (5)–(6) | (7) | (8) | (7)–(8) | |
Book value per share | 1.596 *** | 2.179 *** | −0.583 *** | 1.340 *** | 1.461 *** | −0.121 |
(24.98) | (24.24) | (20.10) | (19.84) | |||
Earnings per share | 2.094 *** | −0.257 | 2.351 *** | 2.028 *** | 2.371 *** | −0.293 |
(7.50) | (−0.86) | (6.59) | (8.01) | |||
N | 5251 | 5085 | 4652 | 5703 | ||
adj. R-sq | 59.5% | 53.4% | 6.1% | 50.9% | 55.2% | −4.3% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Controlled Variables Included | Yes | Yes | Yes | Yes | ||
Panel B (Continued) | ||||||
Dependent Variable: Pricethree | High R&D Expenditures | Low R&D Expenditures | ||||
High PCA | Low PCA | Difference | High PCA | Low PCA | Difference | |
(9) | (10) | (9)–(10) | (11) | (12) | (11)–(12) | |
Book value per share | 1.621 *** | 2.164 *** | −0.543 *** | 1.340 *** | 1.482 *** | −0.142 |
(23.61) | (22.93) | (20.07) | (19.66) | |||
Earnings per share | 2.038 *** | −0.444 | 2.482 *** | 2.067 *** | 2.289 *** | −0.222 |
(7.16) | (−1.43) | (6.58) | (8.02) | |||
N | 5377 | 4959 | 4673 | 5682 | ||
adj. R-sq | 0.599 | 0.523 | 1.9% | 0.515 | 0.540 | −3.1% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Controlled Variables Included | Yes | Yes | Yes | Yes | ||
Part C. High-Tech within Sic Codes Defined by Francis and Schipper (1999) | ||||||
Dependent Variable: Pricethree | High Tech | Low Tech | ||||
High Degree | Low Degree | Difference | High Degree | Low Degree | Difference | |
(1) | (2) | (1)–(2) | (3) | (4) | (3)–(4) | |
Book value per share | 1.684 *** | 2.126 *** | −0.442 *** | 1.543 *** | 1.218 *** | 0.325 *** |
(16.13) | (15.81) | (6.16) | (10.19) | |||
Earnings per share | 0.805 ** | −0.996 ** | 1.801 *** | −0.429 | 3.447 *** | −3.876 *** |
(2.09) | (−2.39) | (−0.46) | (4.18) | |||
N | 3151 | 3395 | 652 | 748 | ||
adj. R-sq | 50% | 48.2% | 1.8% | 47.5% | 69% | −21.5% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Controlled Variables Included | Yes | Yes | Yes | Yes | ||
Panel C (Continued) | ||||||
Dependent Variable: Pricethree | High Tech | Low Tech | ||||
High Eigen | Low Eigen | Difference | High Eigen | Low Eigen | Difference | |
(5) | (6) | (5)–(6) | (7) | (8) | (7)–(8) | |
Book value per share | 1.699 *** | 2.087 *** | −0.388 *** | 1.652 *** | 1.192 *** | 0.46 *** |
(16.14) | (17.00) | (6.56) | (9.67) | |||
Earnings per share | 0.878 ** | −1.144 *** | 2.022 *** | −0.127 | 2.570 *** | −2.697 *** |
(2.19) | (−3.03) | (−0.13) | (3.22) | |||
N | 3143 | 3403 | 648 | 752 | ||
adj. R-sq | 49% | 49.7% | −0.7% | 48.1% | 65.3% | −17.2% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Controlled Variables Included | Yes | Yes | Yes | Yes | ||
Panel C (Continued) | ||||||
Dependent Variable: Pricethree | High Tech | Low Tech | ||||
High PCA | Low PCA | Difference | High PCA | Low PCA | Difference | |
(9) | (10) | (9)–(10) | (11) | (12) | (11)–(12) | |
Book value per share | 1.706 *** | 2.071 *** | −0.365 *** | 1.533 *** | 1.214 *** | 0.316 *** |
(16.48) | (16.24) | (6.42) | (10.63) | |||
Earnings per share | 0.896 ** | −1.181 *** | 2.077 *** | 0.187 | 2.711 *** | −2.524 *** |
(2.24) | (−3.04) | (0.20) | (4.67) | |||
N | 3183 | 3363 | 654 | 746 | ||
adj. R-sq | 49% | 49% | 0% | 45% | 69.1% | −24.1% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Controlled Variables Included | Yes | Yes | Yes | Yes |
Panel A. Entire Sample | ||||||
Dependent Variable: Pricethree | Information Channel | Reputation Channel | ||||
High | Low | Difference | High | Low | Difference | |
(1) | (2) | (1)–(2) | (3) | (4) | (3)–(4) | |
Book value per share | 1.481 *** | 1.737 *** | −0.256 *** | 1.476 *** | 1.750 *** | −0.274 *** |
(28.71) | (29.39) | (28.29) | (30.50) | |||
Earnings per share | 1.734 *** | 1.213 *** | 0.521 * | 1.872 *** | 0.967 *** | 0.905 *** |
(7.82) | (5.33) | (8.59) | (4.20) | |||
N | 10,263 | 10,274 | 10,231 | 10,306 | ||
adj. R-sq | 53.7% | 51.3% | 2.4% | 52.7% | 54% | −1.3% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Controlled Variables Included | Yes | Yes | Yes | Yes | ||
Panel B. High-Tech Group with High Market-to-Book Equity Ratio | ||||||
Dependent Variable: Pricethree | Information Channel | Reputation Channel | ||||
High | Low | Difference | High | Low | Difference | |
(1) | (2) | (1)–(2) | (3) | (4) | (3)–(4) | |
Book value per share | 2.730 *** | 2.924 *** | −0.194 * | 2.709 *** | 2.943 *** | −0.234 ** |
(33.49) | (42.39) | (33.73) | (45.67) | |||
Earnings per share | 1.772 *** | 0.850 *** | 0.922 ** | 1.973 *** | 0.513 * | 1.46 *** |
(5.30) | (2.60) | (5.53) | (1.75) | |||
N | 5257 | 5000 | 5363 | 4894 | ||
adj. R-sq | 69.5% | 68.1% | 1.4% | 68.9% | 69.6% | −0.7% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Controlled Variables Included | Yes | Yes | Yes | Yes | ||
Panel C. High-Tech Group with High R&D Expenditures | ||||||
Dependent Variable: Pricethree | Information Channel | Reputation Channel | ||||
High | Low | Difference | High | Low | Difference | |
(1) | (2) | (1)–(2) | (3) | (4) | (3)–(4) | |
Book value per share | 1.747 *** | 1.971 *** | −0.224 ** | 1.705 *** | 2.090 *** | −0.385 *** |
(22.86) | (22.05) | (22.38) | (26.03) | |||
Earnings per share | 1.638 *** | 0.0389 | 1.599 *** | 1.364 *** | 0.0943 | 1.270 *** |
(5.28) | (0.13) | (4.66) | (0.31) | |||
N | 5334 | 4926 | 5130 | 5130 | ||
adj. R-sq | 58.7% | 51.8% | 6.9% | 55.6% | 57.3% | −1.7% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Controlled Variables Included | Yes | Yes | Yes | Yes | ||
Panel D. High-Tech Group within Sic Codes Defined by Francis and Schipper (1999) | ||||||
Dependent Variable: Pricethree | Information Channel | Reputation Channel | ||||
High | Low | Difference | High | Low | Difference | |
(1) | (2) | (1)–(2) | (3) | (4) | (3)–(4) | |
Book value per share | 1.971 *** | 1.831 *** | 0.14 | 1.860 *** | 2.011 *** | −0.151 |
(16.46) | (15.65) | (16.13) | (16.78) | |||
Earnings per share | 0.382 | −0.820 ** | 1.202 ** | 0.336 | −0.736 ** | 1.072 ** |
(0.92) | (−2.10) | (0.80) | (−2.01) | |||
N | 3091 | 3417 | 3397 | 3111 | ||
adj. R-sq | 52.6% | 44.5% | 8.1% | 46.8% | 51.2% | −4.4% |
Industry Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Year Fixed Effect Included | Yes | Yes | Yes | Yes | ||
Controlled Variables Included | Yes | Yes | Yes | Yes |
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Luehlfing, M.S.; McCumber, W.R.; Qiu, H. CEO Social Capital and the Value Relevance of Accounting Metrics. Risks 2023, 11, 78. https://doi.org/10.3390/risks11040078
Luehlfing MS, McCumber WR, Qiu H. CEO Social Capital and the Value Relevance of Accounting Metrics. Risks. 2023; 11(4):78. https://doi.org/10.3390/risks11040078
Chicago/Turabian StyleLuehlfing, Michael S., William R. McCumber, and Huan Qiu. 2023. "CEO Social Capital and the Value Relevance of Accounting Metrics" Risks 11, no. 4: 78. https://doi.org/10.3390/risks11040078
APA StyleLuehlfing, M. S., McCumber, W. R., & Qiu, H. (2023). CEO Social Capital and the Value Relevance of Accounting Metrics. Risks, 11(4), 78. https://doi.org/10.3390/risks11040078