산업이익과 기업고유이익이 수익성 프리미엄에 미치는 영향 = The Effects of Industry-wide and Firm-specific Earnings on Profitability Premium

다국어 초록 (Multilingual Abstract)

This study examines the profitability premium phenomenon, where firms with high accounting earnings exhibit high expected stock returns, while firms with low earnings show low expected returns. The research decomposes accounting earnings into industry-wide and firm-specific components to analyze their respective effects on profitability premium.
The theoretical foundation rests on economic theory suggesting firm performance is determined by industry-specific factors with long-term effects and firm-specific factors with short-term influences. Following Hui et al. (2016), the study separates accounting earnings into industry-wide earnings attributable to industry factors and firm-specific earnings driven by firm-level characteristics.
Using 40,485 firm-year financial observations and 460,979 firm-month stock return observations from KOSPI and KOSDAQ markets during 1986-2022, the analysis reveals significant findings. First, as industry-wide earnings increase, the profitability premium of accounting earnings diminishes or disappears. When controlling for firm-specific earnings effects, the profitability premium exists only when industry-wide earnings are very small, indicating that industry-wide earnings significantly influence profitability premium existence. This result holds across hedge portfolio analyses and Fama-MacBeth cross-sectional regressions.
Second, hedge portfolio analyses show profitability premium decreases as firm-specific earnings increase. However, when controlling for industry-wide earnings impact, profitability premium persists even with high firm-specific earnings, suggesting diminishing relative influence of firm-specific earnings. This research represents the first empirical examination of how industry-wide and firm-specific earnings components affect acco unting earnings’ profitability premium, offering meaningful insights into capital market interpretation of accounting earnings.When a firm’s accounting earnings are high (i.e., when the firm’s profitability is strong), the expected return on its stock tends to be high. On the other hand, when a firm’s accounting earnings are low (i.e., when profitability is weak), the expected return is typically low. This phenomenon is referred to as the profitability premium (Novy-Marx, 2013; Ball et al., 2015).