The Roles of Accounting Valuations and Earnings Management in the Survivorship of Technology… DOI: http://dx.doi.org/10.5772/intechopen.85395

both survivorship and future performance of tech-firms. Across two of the three years in the study, namely 2008 and 2009, the longer the returns are, the stronger the positive effects from BM, MktCap, MJDA, and R&D become. R&D acts a good predictor of future performance with significant coefficients of 155.73 in 6 months, 265 in 1 year and 335.09 in 3 years respectively in 2008 model. In the 2009 model, the R&D results remain significant at 56.41 and 286.02 respectively.

Sales growth is negatively significant to the medium-term returns (1y) in 2010 with a coefficient of 16.35 (Table 3). This suggests that firms who reported increased growth in year-on-year sales did not necessarily enjoy corresponding positive returns in medium-term. This finding corroborates with past literature suggesting there is a significant association between three-day market returns and Internet firm revenue announcements [19]. This finding and the PS results shed valuable insights into the characterisation of tech stock returns in the crisis periods. Our discretionary accruals (MJDA) variable also exhibits significant linkage to the explanation of increased short- to medium-term returns from 2008. As shown in Table 3 the variable possesses positive coefficients of 1.23 and 4.25 in 2008s 6 month and 3-year outlook respectively which indicates a positive linkage to future returns. Therefore, discretionary accruals is a positive element for the returns which amplifies with longer returns.

As a whole, the accounting variables such as BM, MktCap, MJDA, and R&D have stronger positive effects on the longer-term performances in 2008 and 2009. In general, the large firm size (MktCap), undervaluation (EP and BM), more discretionary accruals and R&D are positive drivers for the returns of the technology firms. The negative effects from sales growth occur in 2010 sometime after the crisis. The overvaluation measured by PS seemed to positively affect the long-term returns but this effect fades out as time goes by.
