Akbar, S (2007): The Separate Valuation Relevance of Earnings, Book Value and their Components in Profit and Loss Making Firms: UK Evidence.
Download (296kB) | Preview
This study examines the separate value relevance of earnings, book value and their components in profit and loss-making firms. The investigation take place in a context that both profit and loss-making firms have different features that might affect conclusions concerning the value relevance of earnings and book value partitions. Thus, we are establishing relationships between disaggregated accounting data and the market value of firms in the profit and loss-making firms in cross-sectional valuation models. These results suggest that for loss-making firms, earnings and book value partitions are not generally valuation relevant. However, for profit-making firms, the earnings partition into working capital from operations and non-current accruals is valuation relevant in almost all cross-sections. Book value partitions have also some valuation relevance for profit-making firms, in the presence of earnings partitions.
|Item Type:||MPRA Paper|
|Original Title:||The Separate Valuation Relevance of Earnings, Book Value and their Components in Profit and Loss Making Firms: UK Evidence|
|Keywords:||earnings, book value, loss making firms, value relevance|
|Subjects:||M - Business Administration and Business Economics; Marketing; Accounting > M4 - Accounting and Auditing > M41 - Accounting
M - Business Administration and Business Economics; Marketing; Accounting > M2 - Business Economics > M21 - Business Economics
|Depositing User:||Saeed akbar|
|Date Deposited:||08. Nov 2007 18:24|
|Last Modified:||12. Feb 2013 15:02|
Akbar, S (2001), ‘Valuation Relevance and Disaggregations of Earnings and Book Value: Some UK Evidence’, PhD Thesis, Manchester Business School, The University of Manchester. Collins, D. W., M. Pincus, and H. Xie, (1999), ‘Equity Valuation and Negative Earnings: The Role of Book Value of Equity’, The Accounting Review, Vol. 74, No. 1, pp. 29-61. Easton, P. D. and T. S. Harris, (1991), ‘Earnings as an Explanatory Variable for Returns’, Journal of Accounting Research, Vol. 29, No. 1, pp. 19-36. Green, J. P., A.W. Stark, and H. M. Thomas, (1996), ‘U.K. Evidence on the Market Valuation of Research and Development Expenditures’, Journal of Business Finance & Accounting, Vol. 23, No. 2, pp. 191-216. Hand, J. R.M. and W. R. Landsman, (1998), ‘Testing the Ohlson Model: v or not v, That is the Question’, Unpublished Research. Hayn, C. (1995), ‘The Information Content of Losses’, Journal of Accounting and Economics, Vol. 20, pp. 125-153. Kothari, S. P. and J. L. Zimmerman, (1995), ‘Price and Return Models’, Journal of Accounting and Economics, Vol. 20, pp. 155-192. Lo, K. and T. Lys, (2000), ‘The Ohlson Model: Contribution to Valuation Theory, Limitations, and Empirical Applications’, Journal of Accounting Auditing and Finance, Vol. 15, pp. 337-367. Ohlson, J. A. (1989), ‘Accounting Earnings, Book Value, and Dividends: The Theory of the Clean Surplus Equation’, Part 1, Working Paper Columbia University. Rees, W. P. (1997), ‘The Impact of Dividends, Debt and Investment on Valuation Models’, Journal of Business Finance and Accounting, Vol. 24, No. 7 & 8, pp. 1111-1140. Stark, A. W. (1997), ‘Linear Information Dynamics, Dividend Irrelevance, Corporate Valuation and the Clean Surplus Relationship’, Accounting and Business Research, Vol. 27, No 3, pp. 219-228. Stark, A.W and H. M. Thomas (1998), ‘On the Empirical Relationship Between Market Value and Residual Income in the U.K’, Management Accounting Research, pp. 445-460. Strong, N. and M. Walker, (1993), ‘The Explanatory Power of Earnings for Stock Returns’, The Accounting Review, Vol. 68, No. 2, pp. 385-399. White, H. (1980), ‘A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity’, Econometrica, Vol. 48, No. 4, pp. 817-38.