The Comparative Value Relevance of Accounting Earnings, Book Value, Net Cash Flows, Operating Income, and Net Operating Cash Flows in Listed Korean Stock Markets

Abstract

This paper explores the comparative value relevance of book value, accounting earnings, net cash flows, operating income, and net operating cash flows in listed Korean stock markets from 2000 to 2013. Especially this study classifies sample data into several subgroups according to firm size (large enterprise vs. small and medium-sized enterprises), financial markets (KOSPI vs. KOSDAQ), technology level (high technology companies vs. low technology companies), and economic conditions (before and after global financial crisis) to examine the value relevance change among main variables. The empirical evidence of this paper shows that net cash flows are most value efficient for the small and medium-sized, KOSDAQ, high-tech, low-tech, and pre-GFC groups, while operating income ranks first for the big firm, KOSPI, and post-GFC groups; accounting earnings are the least value-relevant for the high-tech, low-tech, and pre-GFC groups. Net cash flows are the most value-relevant factor before the GFC and the least after it. These results suggest that the comparative value relevance of book value, accounting earnings, net cash flows, net operating cash flows, and operating income mainly depends on firm size, financial market, technology level, and the GFC in listed Korean stock markets.