Abstract
This paper examines the relationship between earnings and capital expenditures for the firms listed on five ASEAN markets during 2000-2014. The sample period is categorized into investment period (2000-2007) and the performance period (2008-2014). Portfolios are sorted based on capital investment ratios estimated from the investment period to test the relationship between capital expenditure and earnings. The results contradict traditional view that suggested positive association between capital expenditures and future earnings. Among other factors, over-investment by the managers was found to be the main reason that negatively affect earnings.