The main purpose of this paper is to study the listed companies who made their first investment in China during 1996 and 1999. It looks into the financial performance of Taiwanese parent companies before and after their investment in China. This paper also investigates the impacts of growth opportunities and free cash flow over the financial performance of Taiwanese parent companies with investments in China. When evaluating the changes in financial performance during three years before and after investment in China, median values were used since financial performance measures can be skewed and sensitive to outliers. Industry-adjusted performance measures were computed to control effects on industry and difference in the year of investment in China. T-test and Wilcoxon Signed-Rank were used to test the significance of median differences in different periods. This paper also built a Multiple Regression Analysis using financial performance as dependent variable and growth opportunity and free cash flow as independent variables. The results of this study are summarized as follows: (1) After evaluating the financial performance in the third year of investment and one year before the investment using T-test and Wilcoxon Signed-Rank, it was found that the financial performance of the sample firms became worse. Also, there found no significant difference in financial performance when comparing companies in the same industry. (2) In the analysis using the Multiple Recession Model, it was found that the impact of growth opportunities and free cash flow over financial performance were insignificant. This also means that growth opportunity and free cash flow do not have significant impact on financial performance of Taiwanese parent companies with investments in China.
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