Investigation of enterprise value using information transparency: The case of optoelectronic industry

• Author: Yu‐Tai Yang,Tzu‐Yi Yang,Chin‐Mei Chou
• Published date: 01 January 2020
• DOI: http://doi.org/10.1002/jcaf.22420
• Date: 01 January 2020

BLIND PEER REVIEW

Investigation of enterprise value using information transparency:

The case of optoelectronic industry

Tzu-Yi Yang

1

| Chin-Mei Chou

2

| Yu-Tai Yang

3

1

Department of Business and Management,

Ming Chi University of Technology, New

Taipei City, Taiwan

2

Department of Tourism Leisure and Health,

Ching Kuo Institute of Management &

Health, Keelung City, Taiwan

3

Department of Aeronautical and Opto-

Mechatronic Engineering, Vanung

University, Taoyuan, Taiwan

Correspondence

Tzu-Yi Yang, Department of Business and

Management, Ming Chi University of

Technology, Taiwan

Email: tyyang@mail.mcut.edu.tw

Abstract

The corporate information given to the investors is insufficient if it is only financial

information, and thus, it should include other nonfinancial information, such as

relations with the investors, to let the general public accurately understand the situ-

ation of how the enterprise creates its value, the process of corporate transparency.

Therefore, this research discusses the relationship between information transpar-

ency and enterprise value (EV) in stock-listed companies in the optoelectronic

industry that is one of the key industries in Taiwan, and using unbalanced panel

random-effects regression investigates 72 listed firms in the optoelectronic indus-

try. Determining information transparency has a significant influence on EV.

KEYWORDS

enterprise value, information transparency, optoelectronic industry

JEL CLASSIFICATION

G2; G10; G15

1|INTRODUCTION

1.1 |Research background

Today, the global economic and political situation is filled

with high risk and uncertainty, and the trends in the high-tech

sector are highly changing, including in the key industries of

the “Two Trillion and Twin Star plan,”namely, the semicon-

ductor industry and the optoelectronic industry, which led the

economic development of Taiwan (TaiwanJobs, 2017). From

2016 to 2017, these industries had great competitive advan-

tages, as theindustry trend headed in a positivedirection; hope-

fully, the future business operation situation can achieve new

record-breaking performance. The “Two Trillion and Twin

Star plan”of the National Development Council (2008) is a

project implemented by the Taiwanese government in 2002 to

set up the industry core and to promote the newly emerging

industries; two trillion refers to the semiconductor and opto-

electronic industries, with over a trillion dollars in business

value, and twin star refers to the digital content industry and

biotech industry. Such a project was implemented to help with

the incubation of high-tech human resources and to increase

employment opportunities and economic development of this

country. Although the final project promotion was not so sig-

nificant, there was still progress: The semiconductor and opto-

electronic enterprises with self-developed technology had led

Taiwan to takestep forward.

In the 1990s, as the Internet was still in its infancy, the

prevalence of electronic products and traditional cameras led

the development of new products in the optoelectronic

industry; at this point in time, traditional light-emitting diode

(LED) (optoelectronic semiconductor) and traditional optical

components were the mainstream products in the optoelec-

tronic industry, and the prevalence of traditional cameras

increased the demand for precision parts in the optoelectronic

industry to a level beyond the supply. Thus, theoptoelectronic

industry was tightly locked by the industry chains of the

highly growing era of office automation (OA) and informa-

tion technology. In 2000, Taiwan's quickly growing economy

had reached the level of international society, and optoelec-

tronic technology was in an amazing era. Although the inter-

national situation was not good from a macroeconomic

Received: 22 May 2019 Revised: 21 August 2019 Accepted: 11 September 2019

DOI: 10.1002/jcaf.22420

J Corp Acct Fin. 2020;31:83–99. wileyonlinelibrary.com/journal/jcaf © 2019 Wiley Periodicals, Inc. 83

perspective, Taiwan's optoelectronic technology still created

great production value. Regarding LED, the contact image

sensor (CIS), the CD player and the CD-R optical disk for

information use, scanners, and STN-LCD and TFT-LCD

panel products, Taiwan had become one of the top three

manufacturing sites in the world. In 2001, the optoelectronic

industry reached a production value of over four trillion

dollars, and the annual growth rate of the optoelectronic

industry reached 40.86% (Cheng, 2002). With the consumer

electronics and automobile industries gradually growing, it

can be expected that optoelectroni c technology will be hig hly

accepted by the public. From 2010 until today, optoelectronic

products have been widely used in many major fields.

Today, the prosperity created by the optoelectronic indus-

try in the market can be seen in Exhibit 1, which shows the

sum of the transaction value of 29 categories of stocks of

listed companies in Taiwan. From the application directions

announced by the Photonics Industry and Technology Devel-

opment Association (2009) and based on technology types,

these applications can be roughly divided into eight major

fields: (a) LED and lighting application, (b) photovoltaic,

(c) flat panel display (FPD), (d) image sensor and optical

input and output devices, (e) optical storage, (f) optical fiber

communication (OFC), (g) laser light source and application,

and (h) precision optical parts and lenses.

In the history of the optoelectronic industry in Taiwan,

many companies in this oligopoly market had formed a situ-

ation of closely related business and severe competition, and

the change in the optoelectronic industry was seen in the

business items and product structure of one company,

Largan Precision Company Limited (abbreviated as Largan).

This company once had a difficult time with the severe com-

petition of the traditional industry. In recent years, the

popularization of mobile phones has created a large demand

for optical components. Therefore, Largan reformed and

innovated at the same time; it not only improved the yield

rate of its own products but also made a precision decision

on its main product. Meanwhile, the company also diversi-

fied its business to prove its own unique vision.

From another perspective, for the foreign investor to earn

a profit from investment in the field of optoelectronics,

he/she needed to flexibly analyze and judge the corporate

value, so long-term and stable profit could be obtained from

the stocks. Chen (2002) pointed out that in the overall per-

formance of an enterprise, its intangible assets were usually

greater than its tangible assets. Therefore, the difference

between the market value and book value became larger;

thus, information transparency needed to be strengthened.

Moreover, Kaplan and Norton pointed out that the definition

of the balanced scorecard referred to a balance between

short-term and long-term goals, finance and nonfinance, and

lagging and leading indicators. Finance and nonfinance in

the definition meant that, in the evaluation of enterprise

value (EV), in addition to considering the financial perspec-

tive, the nonfinancial perspective need to be considered as

well. The balanced scorecard was used to evaluate EV, and

it was developed because in the traditional evaluation

method, too much focus was placed on financial indicators.

The future growth competence and competitive competence

of an enterprise cannot be appropriately evaluated; therefore,

in such an evaluation, it is necessary to consider four per-

spectives: finance, customer, internal flow and learning and

growth. In summary, it is clear that purely owning financial

information cannot allow for EV to be realized; therefore,

full information disclosure is needed from the enterprise,

and investors and creditors can seize the evaluation factors

EXHIBIT 1 Total traded money of 29 stocks of listed companies in Taiwan [Color figure can be viewed at

wileyonlinelibrary.com]

84 YANG ET AL.