臺大管理論叢 NTU Management Review VOL.30 NO.2

Predicting Future Performance Using Fair Value versus Historical Cost: Evidence from Investment Property 320 the effect of leverage , and firm growth ( MB ) to control for the effect of firm growth opportunities on firms’ performance (Muller, Riedl, and Sellhorn, 2008; Campbell, 2014; Yeh and Wang, 2020). In addition, this study controls for the ownership of state-owned ( STATE ), which may impact firms’ performance in China. This study also controls for the use of external appraiser ( APP ), as hiring an external appraiser may affect estimates of the fair value of investment properties and influence firms’ future performance. SIZE is measured as the log of the total assets. MB is the market-to-book ratio. LEV is measured as the debt-to-total assets ratio. STATE is the percentage of state-owned shares. APP is an indicator, a dummy variable equal to 1 if the estimate value of investment property of firm i is monitored by an external appraiser, and 0 otherwise. This study also includes year fixed effects. All slope coefficients of regression models are adjusted for cluster-robust standard errors and covariance (Petersen, 2009). We anticipate that SIZE, LEV , and STATE are negatively associated with future incomes. To test H2, we employ the following models: IN i,t +1 = β 0 + β 1 IN it + β 2 SUM_FV it + β 3 IN it × SUM_FV it + δ ' Control it + YearDummy + ε i , t . (2a) IN i,t +2 = β 0 + β 1 IN it + β 2 SUM_FV it + β 3 IN it × SUM_FV it + δ ' Control it + YearDummy + ε i , t . (2b) IN i,t +3 = β 0 + β 1 IN it + β 2 SUM_FV it + β 3 IN it × SUM_FV it + δ ' Control it + YearDummy + ε i , t . (2c) where SUM_FV is the accumulated amount of fair value gains and losses divided by lagged total assets. This study expects that the coefficient on IN it × SUM_FV it is positive (i.e., β 3 > 0) if the accumulated changes in the fair value of investment properties provide incremental predictive ability of future earnings under the fair value model. We include firm size ( SIZE ), firm’s leverage ( LEV), firm growth ( MB ), ownership of state-owned ( STATE ), and external appraiser ( APP ). We anticipate that SIZE, LEV , and STATE are negatively associated with future incomes. 4.2 Data Collection and Sample This study uses a sample of Chinese real estate firms listed on China’s A-shares market, which consists of 340 firm-year observations (70 real estate firms) spanning from the years 2007-2014. The sample begins with year 2007 because this is the year that China