Do Mature Firms have More Earnings Informativeness? Evidence From Taiwan
Previous studies have demonstrated that higher levels of individual trading are more subject to decision biases,
thereby causing market mispricing and inefficiency. This study examines how the Taiwan stock exchange market, which is
characteristic of higher levels of individual trading, prices earnings information across different life cycle stages. Our
findings indicate that earnings persistence and value relevance are conditional on the life cycle. In addition, we examine the
market valuation consequences of the life cycle stage, finding that positive future excess returns are earned for mature and
shakeout firms. Our findings indicate that a profitable trading strategy is possible when the market does not fully recognize
the fundamental life cycle information embodied in the financial statements in Taiwan.
Index Terms- life cycle; earnings quality; market mispricing; trading strategy.