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SNA VIII Solo, 15 – 16 September 2005
1
THE EFFECT OF TRANSITORY EARNINGS
ON THE USE OF E/P RATIOS IN CORPORATE VALUATION:
EMPIRICAL EVIDENCE FROM INDONESIA
ERNI EKAWATI
Fakultas Ekonomi Universitas Kristen Duta Wacana
ABSTRACT
The purposes of this study are, firstly, to confirm the findings of the previous
study, whether earnings contain transitory components. Secondly, to investigate how E/P
ratios are affected when firms experience transitory earning changes. Thirdly, to examine
whether the differences in E/P ratios across firms due to differences in the magnitude of
transitory earnings will quickly disappear in subsequent years.
Using financial data of companies listed in Jakarta Stock Exchange (JSE) from
the periods of 1993 to 2003, the study finds that earning changes exhibit a transitory
component. Under the condition of transitory earnings, firm's E/P ratio is positively
affected by the changes in earnings. Industry-adjusted earning changes variable is shown......

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Approximate Word Count: 4553
Approximate Pages: 19 (250 words per double-spaced page)

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