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Summary:

The purpose of this book is to offer a more systematic and structured treatment of the research on accounting based valuation, with a primary focus on recent theoretical developments and the resulting empirical analyses that recognize the role of accounting information in making managerial decisions. Since its inception, valuation research in accounting has evolved primarily along an empirically driven path. In the absence of models constructed specifically to explain this topic, researchers have relied on economic intuition and theories from other disciplines (mainly finance and economics) as a basis for designing empirical analyses and interpreting findings. Although this literature has shed important light on the usefulness of accounting information in capital markets, it is obvious that the lack of a rigorous theoretical framework has hindered the establishment of a systematic and well structured literature and made it difficult to probe valuation issues in depth. More recently, however, progress has been made on the theoretical front.

Table of Contents:

• Machine generated contents note: 1.1. Finance Approaches to Equity Valuation
• 1.1.1. Dividend Discount Model
• 1.1.2. Free Cash-Flow Model
• 1.1.3. Investment Opportunities Approach
• 1.2. RIM
• 1.2.1. Basic Version of RIM
• 1.2.2. Incorporating Financial Activities Into RIM
• 1.3. Accounting Structure Embedded in RIM
• 1.3.1. Illustrating How Self-Correction "Works"
• 1.3.2. Implicit Assumption Behind Self-Correction
• 1.3.3. Accounting as a Closed System: Uncovering Further Restrictions in RIM
• 1.4. What Do Violations of Clean Surplus Entail'?
• 1.5. Empirical Research Comparing the RIM with the Alternative Discount Models
• 1.6. Summary
• Appendix A: Derivation of the RIM
• Appendix B: Self-Correction of the RIM with Respect to Earnings Measurement
• References
• 2.1. Ohlson's (1995) Linear Model
• 2.1.1. Basic LID and the Resulting Valuation Model
• 2.1.2. Properties of Ohlson's (1995) Linear Value Model

• 2.1.3. Nonaccounting (Other) Information in Ohlson (1995)
• 2.2. Introducing Conservatism and Growth: Feltham and Ohlson (1995)
• 2.2.1. Generalized LID with Conservatism and Growth
• 2.2.2. Equity Value Model Based on the Generalized LID
• 2.2.3. Closer Look at the Conservatism Notion Set Out by Feltham and Ohlson (1995)
• 2.3. Information Dynamic in Cash Flows: Feltham and Ohlson (1996)
• 2.3.1. Cash Flow Dynamic and Free Cash Flow-Based Valuation
• 2.3.2. Accounting Model of Equity Value
• 2.3.3. Different Notions of Conservatism: Feltham and Ohlson (1995 Versus 1996)
• 2.4. Empirical Research Related to the Linear Models
• 2.5. Summary
• References
• 3.1. Theoretical Analysis and Predictions: The Case of Unbiased Accounting
• 3.1.1. Basic Assumptions
• 3.1.2. Nonlinear Residual Income Dynamic and Its Properties
• 3.2. Hypotheses
• 3.3. Empirical Analysis and Results
• 3.3.1. Evidence for Capital Following Profitability
• 3.3.2. Evidence for an Increasing and Convex (Versus Linear) Residual Income Dynamic
• 3.3.3. Evidence for the Impact of Investment Opportunity on the Residual Income Dynamic
• 3.3.4. Evidence for the Impact of Divestment Opportunity on the Residual Income Dynamic
• 3.4. Incorporating Accounting Conservatism in the Residual Income Dynamic: An Extended Model
• 3.4.1. Economic Activities
• 3.4.2. Accounting Rules
• 3.4.3. Properties of the Residual Income Dynamic
• 3.5. Summary
• References
• 4.1. Economic Activities and Cash Flow-Based Valuation
• 4.1.1. Technology
• 4.1.2. Investment Opportunities
• 4.1.3. Investment Decision at Date t+1
• 4.1.4. Equity Value at Date t
• 4.2. Accounting-Based Model of Equity Value
• 4.3. Basic Properties of the ROM
• 4.3.1. Effect of Economic Information in Accounting Data
• 4.3.2. Effect of Accounting Conservatism
• 4.4. Incorporating Nonaccounting Information into the ROM
• 4.4.1. General Approach to Incorporating Nonaccounting Information
• 4.4.2. Representative Types of Nonaccounting Information
• 4.5. Summary and Concluding Remarks
• References
• 5.1. Geometric Representations of the ROM
• 5.2. Relation Between V and X Given B
• 5.2.1. Theoretical Predictions
• 5.2.2. Empirical Evidence
• 5.3. Relation Between V and B Given X
• 5.3.1. Theoretical Predictions
• 5.3.2. Empirical Evidence
• 5.4. Relation Between V and B Given ROE
• 5.4.1. Theoretical Predictions
• 5.4.2. Empirical Evidence
• 5.5. Tests Using Full Model Specifications
• 5.5.1. Evidence for Hypotheses 5.1 and 5.2
• 5.5.2. Evidence for Hypothesis 5.3
• 5.6. Accounting Conservatism and the Relation Between V and X
• 5.6.1. Theoretical Prediction
• 5.6.2. Empirical Evidence
• 5.7. Summary
• Appendix A: The Empirical Sample and Variable Measurement
• Reference
• 6.1. Reconciling Prior Empirical Findings with the ROM
• 6.1.1. Adaptation Options and Convex Valuation Functions
• 6.1.2. Exploring the Various Implications of Adaptation Options
• 6.1.3. Examining the Price-Earnings Relation for Firms with Negative Earnings
• 6.1.4. Financial Health and the Valuation Effects of Earnings and Book Value
• 6.2. Evaluation of Empirical Valuation Models
• 6.2.1. Earnings Models
• 6.2.2. Balance-Sheet models
• 6.2.3. Models Incorporating Both Earnings and Equity Book Value
• 6.3. Summary
• References
• 7.1. Simple Valuation Model for a Multiple-Segment Firm
• 7.1.1. Basic Setting
• 7.1.2. Investment Decisions at Date t+1
• 7.1.3. Firm Value at Date t
• 7.1.4. Conditions for Aggregation Across Segments
• 7.2. Incremental Value Effect of Segment-Level Accounting Data
• 7.2.1. Segments Have Equal Growth Opportunities (g1 = g2)
• 7.2.2. Segments Have Dissimilar Growth Opportunities (g1 not = to g2)
• 7.3. Empirical Results on the Incremental Effect of DOP
• 7.3.1. Value Effect of DOP in Broad-Based Samples (Hypothesis 7.1)
• 7.3.2. Firm Profitability and the Incremental Value of DOP (Hypothesis 7.2)
• 7.3.3. Firm Growth and the Value Effect of DOP (Hypothesis 7.3)
• 7.3.4. Differences in Segment Growth Opportunity and the Effect of DOP (Hypothesis 7.4)
• 7.4. Summary and Concluding Remarks
• References
• 8.1. Theoretical Setting
• 8.2. Market Valuation at Date 1 Under Truthful Reporting
• 8.3. Market Valuation Based on Manipulated Segment Data
• 8.3.1. Incentives to Shift Earnings Across Segments
• 8.3.2. Market Inferences from Reported Segment Data
• 8.3.3. Equilibrium
• 8.3.4. Decision to Divest
• 8.4. Factors Determining the Extent of Undervaluation
• 8.4.1. Divergence of Reported Segment Profitability and Undervaluation
• 8.4.2. Complexity of Organizational Structure and Undervaluation
• 8.5. Hypotheses and Empirical Results
• 8.5.1. Circumstances in Which Divestitures Take Place
• 8.5.2. Market Reactions to Divestitures
• 8.5.3. Determinants of Market Reactions to Divestitures
• 8.5.4. Subperiods Before and After SFAS 131
• 8.6. Summary and Conclusions
• Appendix A: Proofs of Theoretical Results
• References
• 9.1. Comparison Between Accounting and Finance Research on Equity Returns
• 9.1.1. Expected Versus Realized Returns
• 9.1.2. How Does the Accounting Research Complement Asset Pricing Theories?
• 9.2. Model of Equity Return Based on the ROM
• 9.3. Estimating the Return Model
• 9.3.1. Regression Models
• 9.3.2. Estimation Results
• 9.3.3. Importance of Individual Factors
• 9.4. Summary
• Appendix A: Variable Measurement for Empirical Analysis
• References
• 10.1. Brief Account of the Return-Earnings Research
• 10.1.1. Initial Evidence on Earnings Informativeness: The Ball and Brown (1968) Study
• 10.1.2. Searching for the Determinants of ERC
• 10.1.3. Mitigating the Problem of Price Leading Earnings
• 10.1.4. Incorporating Both Earnings Levels and Changes in a Return Model
• 10.1.5. Alternative Specifications for Earnings and Return Variables
• 10.2. Critique of the Return-Earnings Research in the Framework of the ROM
• 10.2.1. Restrictive Economic Settings Underlying ERC Research
• 10.2.2. Properties of the ERC as Implied by ROM
• 10.2.3. Does the ROM Justify Both Earnings Levels and Earnings Changes for Returns?
• 10.2.4. How Does the ROM Address Prices Leading Earnings?
• 10.3. Further Examining the Incremental Usefulness of Balance-Sheet Information
• 10.3.1. Bringing Balance-Sheet Information into Return Models
• 10.3.2. Empirical Research Design
• 10.3.3. Evidence from Overall Samples
• 10.3.4. Complementarity Between Balance-Sheet and Income-Statement Information
• 10.4. Summary
• References
• 11.1. Motivation
• 11.2. Economic Setting and Equity Valuation
• 11.3. Accounting Representation of Equity Value and Return
• 11.4. Implications for the Role of Fair Value
• Accounting
• 11.4.1. Relevance of Fair Value Accounting for Financial and Operating Activities
• 11.4.2. Implications for Income Measurement
• 11.4.3. Boundary Between Income and OCI
• 11.5. Summary
• References
• 12.1. Modeling the Valuation Role of Relative Firm Profitability in an Industry
• 12.1.1. Basic Model with Cournot Competition
• 12.1.2. Profitability Differences Caused by Market Share
• 12.1.3. Effect of Capacity Constraints
• 12.2. Hypotheses
• 12.3. Testing the Effect of Relative Profitability on Return Sensitivity to Industry News
• 12.3.1. Empirical Return Model
• 12.3.2. Effect of Relative Profitability from the Pooled Sample
• 12.3.3. Tracing the Effects to Fundamentals: Cost Efficiency and Market Share
• 12.3.4. Effect of Capacity Limits: Distinguishing Between Industries
• 12.4. Effect of Relative Profitability on Earnings Sensitivity to Industry News
• 12.5. Implications
• 12.5.1. Implications for Factors Explaining Equity Returns
• 12.5.2. Implications for Investment Strategies
• 12.5.3. Implications for the ERC Research
• 12.6. Summary
• References
• 13.1. Directions for Future Research
• 13.1.1. Impact of Accounting Manipulation on the Value-Accounting Relation
• 13.1.2. Role of Nonaccounting Information
• 13.1.3. Recognizing the Importance of the Information Environment
• 13.1.4. Looking into the Process via Which Reported Information Is Incorporated in Prices
• 13.1.5. Interdependency Across Firms
• 13.1.6. Coping with Potential Endogeneity
• 13.2. Linking Valuation Theory to Other Accounting Topics
• 13.2.1. Voluntary Disclosures
• 13.2.2. Time-Series Properties of Earnings and Fundamental Analysis
• 13.2.3. Analyst Earnings Forecasts
• Contents note continued: 13.2.4. Accounting Conservatism
• 13.2.5. Standard Setting.

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Author/Creator:

Zhang, Guochang , author

Languages:

English

Language Notes:

Item content: English

Main Work:

Accounting information and equity valuation: theory, evidence, and applications [by Zhang, G.]

Related Series:

Springer series in accounting scholarship

Subjects:

Business enterprises — Valuation

Managerial accounting

Valuation theory

General Notes:

Includes bibliographical references.
Description based on print version record.

Physical Description:

1 online resource.

Call Numbers:

HF5681.V3 Z43 2014eb

ISBNs:

9781461481607 (electronic bk.)
1461481600 (electronic bk.)
9781461481591 [Invalid]
1461481597 [Invalid]

OCLC Numbers:

1048155395

Other Control Numbers:

EBC1466482 (source: MiAaPQ)
[Unknown Type]: ybp11204055