Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Ratio analysis comparability between Chinese and Japanese firms

Ratio analysis comparability between Chinese and Japanese firms Purpose – Firms in different countries operate in different business environments and prepare financial statements following, by necessity, their own countries' accounting standards. Benchmarks for assessing financial ratios of firms in different countries are likely to be different. In conducting financial ratio analyses, each country's unique cultural, business, financial, and regulatory characteristics have to be taken into consideration, for these external factors may exert significant effects on measurements of financial data. This study aims to investigate challenges in comparing financial ratios between Japanese firms and Chinese firms. Design/methodology/approach – This study compares ten major financial ratios of 75 Chinese firms with financial ratios of 75 matched sample Japanese firms to determine if a common benchmark for each of the financial ratios can be applied to firms in both countries. Findings – The results show significant differences in liquidity, solvency, and activity ratios between firms from these two countries. Further examination of differences in accounting standards, economic, and institutional environments between these two countries suggests that these external factors have significant effects on financial ratios and may have contributed to the observed differences. Originality/value – This study is among the first to investigate the comparability of ratios between Japanese firms and Chinese firms to uncover potential challenges and warn investors of such challenges. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Asia Business Studies Emerald Publishing

Ratio analysis comparability between Chinese and Japanese firms

Download PDF
15 pages

Loading next page...
 
/lp/emerald-publishing/ratio-analysis-comparability-between-chinese-and-japanese-firms-qvB64l8nDU
Publisher
Emerald Publishing
Copyright
Copyright © 2013 Emerald Group Publishing Limited. All rights reserved.
ISSN
1558-7894
DOI
10.1108/15587891311319468
Publisher site
See Article on Publisher Site

Abstract

Purpose – Firms in different countries operate in different business environments and prepare financial statements following, by necessity, their own countries' accounting standards. Benchmarks for assessing financial ratios of firms in different countries are likely to be different. In conducting financial ratio analyses, each country's unique cultural, business, financial, and regulatory characteristics have to be taken into consideration, for these external factors may exert significant effects on measurements of financial data. This study aims to investigate challenges in comparing financial ratios between Japanese firms and Chinese firms. Design/methodology/approach – This study compares ten major financial ratios of 75 Chinese firms with financial ratios of 75 matched sample Japanese firms to determine if a common benchmark for each of the financial ratios can be applied to firms in both countries. Findings – The results show significant differences in liquidity, solvency, and activity ratios between firms from these two countries. Further examination of differences in accounting standards, economic, and institutional environments between these two countries suggests that these external factors have significant effects on financial ratios and may have contributed to the observed differences. Originality/value – This study is among the first to investigate the comparability of ratios between Japanese firms and Chinese firms to uncover potential challenges and warn investors of such challenges.

Journal

Journal of Asia Business Studies – Emerald Publishing

Published: Apr 26, 2013

Keywords: Ratio analysis; Japan; China; Benchmarking; Management ratios; Finance and accounting

References

  • Competing globally: how Japanese MNCs have matched goals and strategies in India and PRC
    Anand, J.; Delios, A.
  • Postulates for localized uniformity in accounting
    Alhashim, D.D.; Garner, S.P.
  • The comparative financial managerial performance of US firms and Chinese firms
    Asheghian, P.
  • Japan: some background for security analysts
    Barrett, M.E.; Price, L.N.; Gehrke, J.A.
  • An international implication for accounting
    Beazley, G.F.
  • Earnings management and accounting values: a test of Gray (1988)
    Braun, G.P.; Rodriguez, R.P. Jr
  • Comparison of Japan and PR China
    Chan, A.
  • Determinants of capital structure of Chinese‐listed companies
    Chen, J.J.
  • The Capital Market Effects of International Accounting Diversity
    Choi, F.D.S.; Levich, R.
  • International financial reporting
    Choi, F.D.S.; Harris, T.; Leisenring, J.; Wyatt, A.
  • Analyzing foreign financial statements: the use and misuse of international ratio analysis
    Choi, F.D.S.; Hino, H.; Min, S.; Nam, S.; Ujiie, J.; Stonehill, A.
  • Do spinoffs create value in Hong Kong?
    Chong, T.L.; Wong, W.H.; Liew, K.S.
  • Analysis of the conceptual framework of P.R China's new accounting system
    Davidson, R.A.; Gelardi, A.M.G.; Li, F.
  • A summary of accounting principle differences around the world
    Decker, W.; Brunner, P.
  • Why do national GAAP differ from IAS? The role of culture
    Ding, Y.; Jeanjean, T.; Stolowy, H.
  • An analysis of US and Latin American financial accounting ratios
    Etter, E.R.; Lippincott, B.; Reck, J.
  • Assessing industry risk by ratio analysis
    Falk, H.; Heintz, J.A.
  • A comparative ratio analysis between Chinese and US firms
    Fuglister, J.
  • The ever‐changing roles of Japan and PR China: a detailed look at the evolution of Japanese and Chinese economies
    Gable, N.
  • How chartered financial analysts view financial ratios
    Gibson, C.
  • International accounting research: the global challenge
    Gray, S.
  • Toward a theory of cultural influence on the development of accounting systems internationally
    Gray, S.J.
  • Finance
    Groppelli, A.A.; Nikbakht, E.
  • Financial statement analysis of Italian firms: Accounting practices, environmental factors, and international corporate performance comparisons
    Hagigi, M.; Sponza, A.
  • Culture's Consequences: International Differences in Work‐Related Values
    Hofstede, G.
  • An Evaluation of Financial Ratio Analysis
    Horrigan, J.O.
  • The impact of cultural environment on entry‐level auditors' abilities to perform analytical procedures
    Hughes, S.B.; Sander, J.F.; Higgs, S.D.; Cullinan, C.P.
  • Accounting diary in Japan, J‐GAAP: inventories
    Kawamura, Y.
  • Accounting diary in Japan: J‐GAAP: leases
    Kawamura, Y.
  • Japanese Tax Developments
    Kojima Law Offices
  • Changes in employment security in Asia
    Lee, A.; Kuruvilla, S.
  • Earnings management and investor protection: an international comparison
    Leuz, C.; Nanda, D.; Wysocki, P.
  • China and US financial ratio comparison
    Liu, C.; O'Farrell, G.
  • Taming the dragon
    Lou, S.
  • Measuring performance of Sino‐Japanese joint ventures in China: the relationship among methods, parties, approaches, and impact of national culture
    Lu, L.T.
  • Prediction of bank failures
    Meyer, P.A.; Pifer, H.W.
  • The application of Anglo‐American corporate practices in societies influenced by Confucian values
    Miles, L.
  • Accounting and International Perspective
    Mueller, G.G.; Gernon, H.; Meek, G.K.
  • Earnings management, investor protection, and national culture
    Nabar, S.; Boonlert‐U‐Thai, K.K.
  • Impact of an accounting environment on cash flow prediction
    Nikkinen, J.; Sahlström, P.
  • The survival of international differences under IFRS: towards a research agenda
    Nobes, C.
  • Differences in economic policies of Japan and PRC and the impact on their respective societies
    Padmalingam, S.
  • PRC, Political Risk Yearbook: PRCCountry Forecast, 2008
    PRS Group
  • Japan GDP Finished strong in 2007, Europe faded
    Reuters
  • Doing Business with PRC
    Reuvid, J.; Li, Y.
  • Cross‐cultural managerial skill practices: Filipino and Chinese managers under Japanese‐style management
    Wakabayashi, M.; Kondo, M.; Chen, Z.
  • Comparative Economic Systems: A Decision Making Approach
    William, D.J.; Egon, N.
  • Political influence and co‐existence of a uniform accounting system and accounting standards: recent developments in China
    Xiao, J.; Weetman, P.; Sun, M.
  • Foreign direct investment and PR China's bilateral intra‐industry trade with Japan and the US
    Xing, Y.
  • Exchange rates and competition for FDI in Asia
    Xing, Y.; Wan, G.
  • PR China's GDP grows 10.7 percent in 2006, fastest in 11 years
    Xu, B.
  • Sino‐Japan trade boost bilateral ties
    Zhang, J.
  • Bank size and interest‐rate sensitivity of bank stock returns
    Zhu, J.; Hassan, M.; Li, W.