By Guochang Zhang
The goal of this e-book is to supply a extra systematic and based remedy of the study on accounting‐based valuation, with a chief concentrate on contemporary theoretical advancements and the ensuing empirical analyses that realize the position of accounting details in making managerial decisions.
Since its inception, valuation study in accounting has advanced essentially alongside an “empirically pushed” direction. within the absence of versions developed in particular to give an explanation for this subject, researchers have trusted fiscal instinct and theories from different disciplines (mainly finance and economics) as a foundation for designing empirical analyses and analyzing findings. even though this literature has shed very important mild at the usefulness of accounting info in capital markets, it's visible that the inability of a rigorous theoretical framework has hindered the institution of a scientific and well‐structured literature and made it tough to probe valuation matters intensive.
More lately, even though, development has been made at the theoretical entrance. the 2 such a lot famous frameworks are (i) the “linear info dynamic technique” and (ii) the “real options‐based process” which acknowledges managerial makes use of of accounting info within the pursuit of worth iteration. This quantity devotes its preliminary chapters to an assessment of the versions utilizing the linear dynamic process, after which offers a synthesis of the theoretical reviews that undertake the true concepts technique and the empirical works which draw on them. The e-book additionally attempts to revisit and critique latest empirical study (value-relevance and earnings-response experiences) in the genuine options-based framework. it truly is was hoping that the e-book can heighten curiosity in integrating theoretical and empirical learn during this box, and play a job in assisting this literature become a extra dependent and cohesive physique of labor.
Value is of final situation to monetary decision-makers, and valuation concept may still function a platform for learning different accounting issues. The booklet ends with a decision for elevated hyperlinks of alternative components of accounting examine to valuation theory.
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Additional info for Accounting Information and Equity Valuation: Theory, Evidence, and Applications
Christensen, P. , & Feltham, G. A. (2003). Economics of accounting (Vol. I—Information in Markets). Amsterdam: Kluwer Academic. Christensen, P. , & Feltham, G. A. (2009). Equity valuation. Foundations and Trends® in Accounting, 4(1), 1–112. , Kao, J. , & Richardson, G. D. (2001). Equity valuation employing the ideal versus ad hoc terminal value expressions. Contemporary Accounting Research, 18(4), 625–661. Edey, H. C. (1957). Business valuation, goodwill and the super-profit method. Accountancy (January/February).
5 Empirical Research Comparing the RIM with the Alternative Discount Models RIM represents only one of the several alternative approaches to implementing equity valuation. A number of studies have empirically compared its performance against other models such as the DDM and the FCFM; see for example, Penman and Sougiannis (1998); Courteau et al. (2001); Francis et al. (2000). 8 However, Lundholm and O’Keefe (2001) argue that such comparisons are not meaningful because these models are alternative representations of equity value that are theoretically equivalent and that the differences in results can be attributed 8 See also Lo and Lys (2000) for a discussion of other studies that implement and evaluate RIM.
In this subsection, we reproduce these properties and examine their implications. 1 2 Mapping Accounting Data to Value via Linear Information Dynamics. . Long-Term Behavior of Expected Residual Income and Equity Value The first property concerns the long-term expected residual income and equity value. 1 LID (Eq. 1 Et ðXtþτ Þ ! 1 Et ðVtþτ À Btþτ Þ ! 0. That is, as we look into the far-off future, we expect residual income to approach zero and equity value to approach equity book value. 1 follows from Eq.
Accounting Information and Equity Valuation: Theory, Evidence, and Applications by Guochang Zhang