Empirical Evidence on the Performance Prediction and Stock Price Reaction in Taiwan's Listed Firms

Chen, L. C., Hung, H.. R. P., and Chen, L. F. 1995. Empirical Evidence on the Performance Prediction and Stock Price Reaction in Taiwan's Listed Firms. NTU Management Review, 6 (1): 043-080

Long-Chie Chen, Institute of Business Administration, National Chengchi University, Taiwan, R.O.C.
Paul R. H. Hung, Department of Institute of Business Administration, National Central University, Taiwan, R.O.C.
Li-Fu Chen, Cosmos, Bank

Abstract

This paper applies Multiple discriminant analysis (MDA), Logit analysis, Probit analysis, Market model, and questionnaire to analyze the performance prediction and stock price reaction in Taiwan's listed firms. We find that the discriminant abilities of MDA are most above 70%, when the accounting information comes from original samples; but the ex ante predictive power is insignificant when the data come from the second period samples. We also find that the CAR of the firms that predicted good performance is better than the firms that predicted bad performance, and most investors in stock market understand the importance of accounting information and earnings, but some of them are not good at the techniques of performance prediction.  


Keywords

Performance prediction Stock price reaction


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