Economic Freedom, Investment Flexibility, and Equity Value: A Cross-Country Study

doi:10.2308/accr-51034

CORC > 上海财经大学 > 上海财经大学

	Economic Freedom, Investment Flexibility, and Equity Value: A Cross-Country Study
	Chen, Chih-Ying 1; Chen, Peter F.2; Jin, Qinglu 3
刊名	ACCOUNTING REVIEW
	2015-09
卷号	90 期号:5 页码:1839-1870
关键词	economic freedom investment flexibility real options equity value
ISSN号	0001-4826
DOI	10.2308/accr-51034
英文摘要	Prior studies show that equity value has convex relations with earnings and book value of equity, respectively, due to growth and adaptation options (Burgstahler and Dichev 1997a; Zhang 2000). However, these studies do not consider the role of institutions in affecting firms' ability to exercise growth and adaptation options. In this study, we investigate whether these convex relations vary with the degree of a country's economic freedom, which may influence the frictions and costs of exercising these options. We develop four hypotheses: In countries with greater economic freedom: (1) a firm's capital investment in response to profitability is greater; (2) the relation between equity value and earnings, given equity book value, is more convex; (3) the relation between equity value and equity book value, given earnings, is more convex; and (4) the relation between stock return and profitability change is more convex. Using the Economic Freedom of the World index from the Fraser Institute, we test our hypotheses with data from 30 countries during the 2000-2010 period. The empirical results are consistent with these hypotheses. The effect of economic freedom that we document is distinct from the effects of GDP level and growth, legal origin, law enforcement, investor protection, and quality of accounting standards. Our results suggest that greater economic freedom enhances equity value through more efficient management of investment options.
WOS研究方向	Business & Economics
语种	英语
出版者	AMER ACCOUNTING ASSOC
WOS记录号	WOS:000368809500005
内容类型	期刊论文
源URL	[http://10.2.47.112/handle/2XS4QKH4/1473]
专题	上海财经大学
通讯作者	Chen, Chih-Ying
作者单位	1.Singapore Management Univ, Singapore 178902, Singapore; 2.Hong Kong Univ Sci & Technol, Hong Kong, Hong Kong, Peoples R China; 3.Shanghai Univ Finance & Econ, Shanghai, Peoples R China
推荐引用方式 GB/T 7714	Chen, Chih-Ying,Chen, Peter F.,Jin, Qinglu. Economic Freedom, Investment Flexibility, and Equity Value: A Cross-Country Study[J]. ACCOUNTING REVIEW,2015,90(5):1839-1870.
APA	Chen, Chih-Ying,Chen, Peter F.,&Jin, Qinglu.(2015).Economic Freedom, Investment Flexibility, and Equity Value: A Cross-Country Study.ACCOUNTING REVIEW,90(5),1839-1870.
MLA	Chen, Chih-Ying,et al."Economic Freedom, Investment Flexibility, and Equity Value: A Cross-Country Study".ACCOUNTING REVIEW 90.5(2015):1839-1870.