Abstract

This study explores the prediction that the pricing multiple on the earnings (equity book value) increases/decreases as the listed firms who have larger magnitudes of financial instruments usage after the SFAS No. 34 is enforced in Taiwan. The empirical result indicates that the relative value relevance of earnings variable increases for the active financial instruments users compared to firms who only moderately use or do not use financial instruments. These results remain robust to the various specification tests. It is also found that the relative value relevance of equity book value decreases for the active financial instruments users; yet, are sensitive in some robust tests.

Key words: SFAS No.34, financial instruments, value-relevance, earnings, equity book value.