ارزش مرتبط و حباب دات کام دهه 1990

During the dot-com bubble of the 1990s, equity market valuation was a popular topic for investors, financial analysts and academics. Some questioned whether traditional accounting and financial information had lost its value relevance, as stocks traded at multiples of earnings well in excess of historic levels, leading Alan Greenspan to caution against “irrational exuberance.” This study examines the relation between market valuation and traditional accounting/financial information before, during and after the bubble. We confirm previous research that documents a decline in the relation between market value and traditional accounting information leading up to the bubble period. However, we also document that after the collapse of the bubble in 2000 this trend reverses. We also examine two related metrics that may provide a rational explanation for this phenomenon, including the quality of earnings, and the aggressiveness of financial analysts’ forecasts, finding some support that earnings quality may contribute to the changes in value relevance, but not the aggressiveness of analyst forecasts.

During the dot-com bubble of the 1990s, many questioned the value of fundamental financial information for investment decision-making purposes. Stocks were trading at record multiples of earnings. In fact many companies with no earnings at all, experienced significant increases in their stock prices during the latter half of the 1990s. A number of academic studies documented a decline in the linear relationship between earnings and stock returns (e.g., Brown et al., 1999, Ely and Waymire, 1999, Francis and Schipper, 1999 and Lev and Zarowin, 1999). Investors called for additional information beyond the traditional financial statements based on Generally Accepted Accounting Principles (GAAP). Some argued that earnings no longer mattered and that other metrics such as number of clicks or page views were more appropriate in the new economy (Penman, 2003). Others argued that bad accounting and poor accounting standards contributed to the 1990s bull market (Krugman, 2004 and Stiglitz, 2003). In response to these demands, companies began releasing so called “pro-forma” financial information that presented what the company's financial statements would look like if they did not have to follow current accounting guidelines. Amazon.com Inc. started the trend in the second quarter of 1998 by excluding amortization expenses on intangible assets, and was quickly followed by Yahoo! Inc. and others. By the middle of 2001, the majority of S&P 500 companies excluded some GAAP expenses when reporting financial performance in their press releases (Best, 2006). The practice became such a concern to the SEC that on December 4, 2001 it issued an advisory statement that cautioned public companies not to mislead investors, providing five propositions for guidance on the dissemination of pro-forma information (SEC, 2001).1 Penman (2003) describes the bubble period of the 1990s as a pyramiding chain letter where momentum investing displaced fundamental investing. The mood was perhaps best described by Alan Greenspan, Chairman of the Federal Reserve Board, when he cautioned against irrational exuberance in a speech at The American Enterprise Institute for Public Policy Research on December 5, 1996 ( Greenspan, 1996). These prophetic words have been the subject of many discussions since, and they motivate our investigation of this bubble and its subsequent collapse. Specifically, we examine the value relevance of accounting and financial information during the period of time surrounding the dot-com bubble, from 1995 to 2000. This period of time is referred to as the new economy period (NEP) by several researchers, who examine trends in value relevance leading up to this time period (e.g., Core et al., 2003, Demers and Lev, 2001 and Trueman et al., 2003). Our study extends these prior studies into the post dot-com bubble period by examining a broad cross-section of firm-year observations from 1989 through 2006 and a sub-sample of firms in high technology industries that are thought to be more representative of the so called “new economy firms.” We find that value relevance as measured by regression R2 decreased during the bubble period, from 1995 to 2000, consistent with prior research, but increased after the collapse of the bubble in 2000. We find similar results for both high technology and low technology sub-samples. We also examine two related metrics as possible explanations for this phenomenon. First, we use a proxy for perceived earnings quality and find no significant difference in perceived earnings quality occurs during the dot-com bubble period, suggesting that the decline in value relevance cannot be explained by a perceived decline in the quality of financial reporting for the overall sample. However, when we split the sample between high technology and low technology firms, we find that the perception of earnings quality for high technology firms declined during the dot-com bubble period, and remained low for the next four years after the bubble collapsed. In contrast our low-tech sample reflects no change during the bubble period and improved quality perceptions following the bust, suggesting that the investing public was still apprehensive about the quality of financial reporting for the high-tech segment of the economy, but not the low-tech segment. Therefore, the overall value relevance trend, which declines during the bubble period then increases following the bursting of the bubble, can only be explained, in part, by perceived earnings quality. We also examine whether financial analysts may have contributed to the decline in value relevance during the dot-com bubble period by being overly aggressive with their forecasts. We find no evidence, of increased aggressiveness in forecasting during the bubble period. However, we do find a significant decline in aggressiveness following the bubble bursting. The results of our study are likely to be of interest to academics, accountants, financial professionals, investors, and regulators for a number of reasons. First, the general decline in value relevance identified by the academic community in prior research appears to have stopped and reversed in the post bubble period, which to our knowledge has not been previously documented. For accounting and financial professionals, the decline in value relevance and perceived earnings quality during the dot-com bubble period followed by an increase in value relevance after the collapse should serve to encourage continued improvement in the quality of financial reporting. From the investor perspective, the results indicate that reliance on traditional accounting and financial information for investment decision making still has merit. For accounting regulators, the results provide support for resisting any call to reduce reporting standards just because certain interest groups argue that a “new economy” requires new or different information. The remainder of the paper is organized as follows: Section 2 reviews prior research and develops our hypotheses, Section 3 discusses research methods and models used in the study, Section 4 summarizes the sample selection process, Section 5 presents the empirical results, and Section 6 summarizes results and offers some conclusions and opportunities for future research.

During the dot-com bubble of the 1990s, there was talk about traditional accounting and financial information losing its value relevance with respect to serving as a proxy for expected future cash flow. As a result, some called for changes in the way that accounting information was reported. Others argued that we were entering into a new economy period, and that non-accounting factors were more important in value estimation than traditional accounting measures. This study provides evidence that during the dot-com bubble period, the value relevance of accounting information as measured by adjusted R2 values from a valuation regression model was significantly lower than for the previous six years, consistent with prior research. However, we also document that in the six years after the dot-com bubble collapsed, the adjusted R2 values are significantly higher than during the dot-com bubble period, and are comparable to the period leading up to the bubble. This trend occurred in a broad cross-section of all firms during that period as well as for a sub-sample of high technology firms that were considered to be typical of the “new economy” firms. These results tend to support the argument that during the dot-com bubble period the market may have behaved in a less rational manner than it did before or after. We examine two alternative explanations for the decline in value relevance. The first is that the decline may have been due in part to a decline in the quality of financial reporting. Using a proxy for perceived earnings quality, we find that the perception of earnings quality has not changed significantly during the dot-com bubble period for a broad cross section of firms. However, we did find a significant decline in perceived earnings quality between the pre-bubble and bubble period for Hi-Tech firms but not for Lo-Tech firms and that after the collapse of the bubble only the perceived quality of Lo-Tech firms has improved significantly. In fact, the perceived quality of earnings for Hi-Tech firms continued to be low, suggesting that the investing public may still have been apprehensive about the quality of financial reporting by these firms. Therefore, we conclude that a decline in earnings quality can only explain part of the decline in value relevance. We also examine whether the decline in value relevance may be due to over-aggressive forecast estimates by financial analysts. We show that prior to and during the dot-com bubble period, analysts’ forecasts consistently exceeded actual results, and that after the collapse, forecasted EPS have been lower than actual EPS, especially for Hi-Tech firms. However, contrary to our expectations, the forecast accuracy ratios during the bubble period are not higher than the pre-bubble or post-bubble periods. Therefore, our results do not support an alternative suggestion that overly aggressive analyst forecasts may have contributed to the decline in value relevance. Our results are also contrary to prior research that finds financial analysts were partly to blame for the dot-com bubble (Liu and Song, 2001 and O’Brien and Tian, 2006). Our findings, on the other hand, show that analysts’ forecasts were fairly close to actual earning numbers during the bubble period. Given the mixed results between prior studies and our findings, we recommend future studies should further investigate the role of financial analysts during the dot-com period. One avenue of future research could be the investigation of the stock recommendations of sell-side analysts during the dot-com period. In summary, we found only some support for the earnings quality explanation and no support for the aggressive analyst forecast explanation, which leaves open the possibility that irrational exuberance is responsible for the decline in value relevance. Although the lack of support for our alternative explanations does not in itself provide support for the irrational exuberance explanation, we cannot exclude it as a possibility. Finally, our results show that whatever caused the decline in value relevance, the trend reversed following the collapse and fundamental accounting measures regained most of the value relevance they had prior to the dot-com bubble period. These results have implications for at least four groups: academics, financial professionals, investors, and regulators. For academics, it confirms prior research on the decline in value relevance of accounting and financial information that was taking place in the 1990s, and it documents a reversal in this trend following the collapse of the bubble. To our knowledge, no other study had documented this reversal. Our study also explores various explanations as to what may have contributed to the decline, other than “irrational exuberance.” Future behavioral and earnings quality research may be useful in providing additional insights into this phenomenon. For financial professionals such as auditors, financial analysts, mutual fund managers and corporate accountants, these results suggest that investors do value the financial information provided to them, especially during non-bubble times. As for investors, these results suggest that the long history of using fundamental accounting and financial information for investment decision-making has merit. Additionally, our findings provide warning signs to help the investor spot future bubbles in that when the relation between fundamental accounting variables and stock prices begin to reach levels never before seen, a red flag should be raised. Finally, for regulators and other standard setters, this study confirms that GAAP and other reporting regulations serve a purpose in the process of communicating between publicly traded corporations and the investing public. They should proceed with caution when pressure mounts to replace the historical accounting model with “modern” approaches to financial reporting.