ATJ Asian Tax Journal

Asian Tax Journal

Print ISSN 1738-3323 Online ISSN 2733-9270

a study on the usefulness of beta in the determination of firm valuation -focused on KOSDAQ listed companies-

  • Dong-Seob Song Dankook University

Asian Tax Journal Vol. 6 No. 1 (2005), pp. 57-69

Abstract

The purpose of this study is to empirically examine whether or not the beta risk in the stock market has an impact on the stock price determination of KOSDAQ listed companies and to verify the type of business(non-venture and venture business) can influence the correlation between the beta risk in the stock market and stock prices. For this empirical study, KOSDAQ listed companies from 1999 through 2002 were mainly considered. The results were as follows; There was a close correlation between accounting variables and stock prices in the companies stable in the beta risk. It means that accounting variables stable in the beta risk is so useful to predict future cash flow that the usefulness of accounting information is increased in the determination of firm valuation. However, companies unstable in the beta risk had difficulties in predicting future cash flow. Therefore, accounting variables of those companies had much less influence on stock prices. Moreover, the higher the beta risk in the stock market was, the lower the stock price of the company in venture business was, not non-venture companies. It means that the type of business has influence on the correlation between the beta risk and stock prices. This study is of significance as it verified that the beta risk in the stock market had influence on the determination of firm valuation through accounting variables.

Keywords

  • KOSDAQ listed companies
  • beta
  • accounting variables

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Asian Tax Journal

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