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Author: Ahmed Abdalla
Publisher:
ISBN:
Category :
Languages : en
Pages : 58
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Book Description
We examine the information content of earnings components conditional on the existence of misclassification of earnings in the income statement. We develop a vector autoregression (VAR) of a set of accounting variables that accommodates, besides other variables, two components of transitory earnings; a core component reflecting shifted core earnings and a transitory component reflecting purified transitory earnings. Our model analysis derives two properties of shifted core earnings. Shifted core earnings forecast future abnormal earnings similar to reported core earnings, and shifted core earnings provide a "bad news" signal of management incompetence. Using special items as measure of a transitory line item that is potentially contaminated by shifted earnings, we provide empirical evidence in support of the former. We propose and find empirically that purified special items are transitory. Nevertheless, our evidence suggests that stock prices do not fully reflect the heterogeneity between the core and transitory components of special items, but rather overstate the entire amount of special items when shifting is suspected.
Author: Ahmed Abdalla
Publisher:
ISBN:
Category :
Languages : en
Pages : 58
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Book Description
We examine the information content of earnings components conditional on the existence of misclassification of earnings in the income statement. We develop a vector autoregression (VAR) of a set of accounting variables that accommodates, besides other variables, two components of transitory earnings; a core component reflecting shifted core earnings and a transitory component reflecting purified transitory earnings. Our model analysis derives two properties of shifted core earnings. Shifted core earnings forecast future abnormal earnings similar to reported core earnings, and shifted core earnings provide a "bad news" signal of management incompetence. Using special items as measure of a transitory line item that is potentially contaminated by shifted earnings, we provide empirical evidence in support of the former. We propose and find empirically that purified special items are transitory. Nevertheless, our evidence suggests that stock prices do not fully reflect the heterogeneity between the core and transitory components of special items, but rather overstate the entire amount of special items when shifting is suspected.
Author: Yin Yu
Publisher:
ISBN:
Category :
Languages : en
Pages : 129
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Book Description
Valuation theory (Ohlson and Juettner-Nauroth (OJ), 2005) demonstrates that Abnormal Earnings Growth AEG drives firm value. There are three implications. First, a firm ought to grow at the rate of cost of capital net of dividends paid out, similar to a savings bank account. This characterization has been labeled as earnings dynamics (ED) in Ohlson (1991). Second, Abnormal earnings growth forecast ought to translate previous knowledge of past earnings and dividend into earnings growth potential beyond the firms's expected return and firm value as well. The last, if the market does not completely adjust to abnormal earnings growth information, portfolio created based on abnormal earnings growth ought to produce arbitrage returns. Those three implications are developed into papers as follows: the first paper tests whether the market recognizes the forecast of abnormal growth in earnings as benchmark for performance when analysts announce their earnings forecasts. The second paper examines whether higher abnormal growth expectation in the current year will yield higher future accounting and stock performances. Results indicate that the market uses the ED information asymmetrically to interpret bad news from the first analyst earnings forecasts and seem to punish dividend payouts if it leads to the ED forecast to be lower than the past earnings. The evidence in the second paper shows that higher abnormal earnings growth leads to higher future accounting performance over following two years and continue to persist up to four years. Arbitrage profit based on abnormal earnings growth is profitable and significant in 23 out of 23 years. After control for expected abnormal earnings growth and the cost of capital, regression results show that B/M and E/P anomaly does not go away. Results indicate that abnormal earnings growth is another valuation anomaly separate from B/M and E/P. A hedge test provides the evidence that abnormal earning growth strategy can be refined by controlling B/M or E/P effect, to make even greater arbitrage return.
Author: Yuan Mingzhe
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
How to valuate a stock has been a puzzle baffling stock investors since stocks were created. The main reason is that almost all the existing stock pricing models, such as dividend discount model, discount cash flow model, and abnormal earnings model, need to forecast infinite future unknown variables that are unfortunately erratic. To solve the puzzle, a feasible approach is to transform the unknown future variables into a form that can be easily forecasted. The concepts of generating functions of accounting variables about continuous time are set up, and based on the concepts, through mathematical transformations, continuous time abnormal earnings models are established in the paper. The continuous time abnormal earnings models not only make it possible to forecast infinite future unknown variables, but also can be calculated and used easily. The empirical results based on Chinese listed companies provide evidence for the superiority of the continuous time abnormal earnings model.
Author: Aswath Damodaran
Publisher: Now Publishers Inc
ISBN: 1601980140
Category : Business & Economics
Languages : en
Pages : 102
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Book Description
Valuation lies at the heart of much of what we do in finance, whether it is the study of market efficiency and questions about corporate governance or the comparison of different investment decision rules in capital budgeting. In this paper, we consider the theory and evidence on valuation approaches. We begin by surveying the literature on discounted cash flow valuation models, ranging from the first mentions of the dividend discount model to value stocks to the use of excess return models in more recent years. In the second part of the paper, we examine relative valuation models and, in particular, the use of multiples and comparables in valuation and evaluate whether relative valuation models yield more or less precise estimates of value than discounted cash flow models. In the final part of the paper, we set the stage for further research in valuation by noting the estimation challenges we face as companies globalize and become exposed to risk in multiple countries.
Author: Popescu, Cristina Raluca Gh.
Publisher: IGI Global
ISBN: 1668425254
Category : Business & Economics
Languages : en
Pages : 512
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Book Description
The COVID-19 pandemic has shocked every part of society. The rise of businesses to the important task of improving sustainability and responsibility has been interrupted by the stress of the pandemic. In its wake, organizational leaders must reassess the best strategies considering the changes made by the “new normal.” The Handbook of Research on Changing Dynamics in Responsible and Sustainable Business in the Post-COVID-19 Era provides valuable insight of the significant changes caused by the COVID-19 pandemic in terms of defining, characterizing, presenting, and understanding the meaning, challenges, and implications of responsible and sustainable business. Covering topics such as consumerism, supply chain management, and sustainable organizational performance, this major reference work is an excellent resource for academicians, scientists, researchers, students, business specialists, business leaders, consultants, government institutions, and policymakers.
Author: 楊宜華
Publisher:
ISBN:
Category :
Languages : en
Pages : 92
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Book Description
Author: Rickard Olsson
Publisher:
ISBN:
Category :
Languages : en
Pages : 43
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Book Description
We derive analytical formulas for the post-horizontal and asymptotic behavior of earnings, dividends, book value, and key financial ratios, as implied by the terminal value model of constant perpetual abnormal earnings growth. The implications of Claus and Thomas (2001) (CT) abnormal earnings growth forecasts for these quantities are examined and found reasonable. Analysis of the implicit functional relationships between the equity premium and the aforesaid quantities using CT's U.S. data reveals that a traditional premium of 8% implies 14% asymptotic growth in abnormal earnings, earnings, dividends and book value, and equally extreme asymptotic return-on-equity, price-to-earnings and price-to-book ratios.
Author: Frederic S. Mishkin
Publisher: University of Chicago Press
ISBN: 0226531929
Category : Business & Economics
Languages : en
Pages : 184
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Book Description
A Rational Expectations Approach to Macroeconometrics pursues a rational expectations approach to the estimation of a class of models widely discussed in the macroeconomics and finance literature: those which emphasize the effects from unanticipated, rather than anticipated, movements in variables. In this volume, Fredrick S. Mishkin first theoretically develops and discusses a unified econometric treatment of these models and then shows how to estimate them with an annotated computer program.
Author: Joshua Ronen
Publisher: Springer Science & Business Media
ISBN: 0387257713
Category : Business & Economics
Languages : en
Pages : 587
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Book Description
This book is a study of earnings management, aimed at scholars and professionals in accounting, finance, economics, and law. The authors address research questions including: Why are earnings so important that firms feel compelled to manipulate them? What set of circumstances will induce earnings management? How will the interaction among management, boards of directors, investors, employees, suppliers, customers and regulators affect earnings management? How to design empirical research addressing earnings management? What are the limitations and strengths of current empirical models?
Author: Carol Corrado
Publisher: University of Chicago Press
ISBN: 0226116174
Category : Business & Economics
Languages : en
Pages : 602
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Book Description
As the accelerated technological advances of the past two decades continue to reshape the United States' economy, intangible assets and high-technology investments are taking larger roles. These developments have raised a number of concerns, such as: how do we measure intangible assets? Are we accurately appraising newer, high-technology capital? The answers to these questions have broad implications for the assessment of the economy's growth over the long term, for the pace of technological advancement in the economy, and for estimates of the nation's wealth. In Measuring Capital in the New Economy, Carol Corrado, John Haltiwanger, Daniel Sichel, and a host of distinguished collaborators offer new approaches for measuring capital in an economy that is increasingly dominated by high-technology capital and intangible assets. As the contributors show, high-tech capital and intangible assets affect the economy in ways that are notoriously difficult to appraise. In this detailed and thorough analysis of the problem and its solutions, the contributors study the nature of these relationships and provide guidance as to what factors should be included in calculations of different types of capital for economists, policymakers, and the financial and accounting communities alike.
