【2021/01/01 Vol. 28, No. 1】
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Market-to-book Ratio and Capital Structure: Market Timing vs. Growth Opportunities

Author: Chen-Ho Wu, Chen-Chien Hung, Shao-Hsi Chung, Jun-Wen Chang
Keywords: Market-to-book Ratio, Capital Structure, Market Timing, Growth Opportunity
Abstract: Market-to-book ratio inversely relates to debt ratio was confirmed by many previous studies. Some studies believe that this is evidence of market timing. However, another study pointed out that if the target capital structure changes over time and there is adjustment cost, even if the company does not choose the time opportunity to raise funds, when the market value ratio is the proxy variable of the growth opportunity, it still has a negative impact on the debt ratio. The above- mentioned inconsistent empirical results caused by market-to-book ratio can be a measure of market misvaluation (market timing) and growth opportunities. This study disaggregates the market-to-book ratio into market misvaluation and growth opportunity, and directly verifies the correlation between these components of market-to-book ratio and debt ratio. The findings confirm the hypotheses of market timing and growth opportunity (or capital-structure adjustment model).


A Quantile Regression Analysis of the O/S Ratio-Return Relation

Author: Ya-Wei Yang, Zih-Ying Lin, Guo-Yao Wu
Keywords: O/S Ratio, Quantile Regression, Information Content, Foreign Institutional Investors, Taiwan Index Options Market
Abstract: This paper examines how the option/stock trading volume ratio (O/S ratio) predicts future underlying stock returns. We use quantile regression to analyse the relationship between O/S ratio and returns. The O/S ratio is classified by bull and bear market to quantify the behaviour of foreign institutional investors in Taiwan. The empirical results show that the O/S ratio in bull market has higher future stock returns and that the O/S ratio in bear market is negatively associated with future stock returns. Such results indicate that the trading of foreign institutional investors in Taiwan contain information. The predictability of O/S ratio is still significant after controlling for stock volumes and current stock returns. In addition, we also find that the predictability of O/S ratio is changed during U.S. financial crisis.


The Correlation Between the Quality of Disclosures in Corporate Social Responsibility Reports and Enterprise’s Value in Taiwan

Author: Ping-Jung Hsieh, Chien-Chih Chen, Yin-Hsing Wang
Keywords: Corporate Social Responsibility, Corporate Social Responsibility Report, Enterprise Value, Disclosure Quality
Abstract: In recent years, corporate social responsibility (CSR) issues have drawn more and more attention from the general public, and CSR has become essential information to be acquired by stakeholders and a key indicator for relevant enterprise evaluations. The purpose of this study is to explore whether there is a correlation among CSR, the quality of disclosures in CSR reports, and enterprise value based on the CSR reports issued by the listed companies in Taiwan that are among the Top 50 winners of Taiwan’s excellence in CSR award. One of the results showed that CSR reports had a positive influence on enterprise value. It also proved that the high-quality disclosures in CSR reports had a positive influence on enterprise value; that is, reports with higher quality disclosures, the higher enterprise value would happen.


Does Diversified Operation Improve Performance? – An Example of Taiwanese Non-Life Insurance Industry

Author: Guan-Chih Chen
Keywords: Non-life insurance, Diversified operation, Performance, Economics of Scope
Abstract: This study explores the impact of diversification on the performance of Taiwanese non-life insurers from the perspectives of profit, cost and underwriting. The results point out that there are differences in the diversified operation and performance of different corporate types. Secondly, this study finds that whether the modified Herfindahl-Hirschman index representing product diversification or the number of branches offices representing regional diversification, a non-linear relationship exists between diversified business strategies and performance. Finally, this study also explores whether there is a difference in the impact of diversified operations on performance under different corporate types. As a result, it is found that the domestic insurers are in the stage of improving performance through product diversification and have economics of scope. For non-financial holding non-life insurers, the over-establishing of branch offices will increase the cost to erode profits. For foreign non-life insurers, the number of branch offices still has room to increase. As the financial holding non-life insurers has a relatively large scale, the establishment of branch offices effectively creates underwriting profits and improves performance.



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