Search results for "Residual income valuation"

showing 3 items of 3 documents

The Risk-Relevance of Accounting Data: Evidence from the Spanish Stock Market

2006

This paper analyses the relevance of accounting fundamentals to inform about equity risk as measured by the cost of equity capital. Assuming the latter is a summary measure of how investors make decisions regarding the allocation of resources, the strength of the association between the cost of capital and the accounting-based measures of risk indicates how important these measures are for market participants when making economic decisions. To infer the cost of equity capital, we use the O'Hanlon and Steele's method, which is based on the residual income valuation model. Moreover, we use the insights from this model to provide a theoretical underpinning for the choice of the accounting vari…

Equity riskActuarial scienceFinancial economicsbusiness.industryEconomic capitalFinancial risk managementAccountingCapital adequacy ratioCost of capitalAccountingEconomicsBusiness Management and Accounting (miscellaneous)businessReturn on capitalFinanceEquity capital marketsResidual income valuationJournal of International Financial Management and Accounting
researchProduct

Equity valuation in practice: The influence of net financial expenses

2014

Abstract This study investigates the relevance of net financial expenses with respect to equity valuation in an IFRS accounting regime. According to the residual earnings valuation model, income related to balance sheet items that are recorded at fair value is not applicable for valuation purposes. There are no residual earnings associated with these items because the balance sheet provides ‘perfect’ value estimates for the items in question. In accordance with the contention that under IFRS, aggregate net financial liabilities are recorded at a book value that is close to fair value, this study demonstrates that net financial expenses are not associated with the market prices of stocks. Th…

FinanceActuarial scienceMark-to-market accountingbusiness.industryAccountingInventory valuationNet incomeAccountingFair valueEconomicsBalance sheetbusinessMarket valueFinanceValuation (finance)Residual income valuationAccounting Forum
researchProduct

The Role of Assumptions in Ohlson Model Performance: Lessons for Improving Equity-Value Modeling

2021

In this paper, we test whether the short-run econometric conditions for the basic assumptions of the Ohlson valuation model hold, and then we relate these results with the fulfillment of the short-run econometric conditions for this model to be effective. Better future modeling motivated us to analyze to what extent the assumptions involved in this seminal model are not good enough approximations to solve the firm valuation problem, causing poor model performance. The model is based on the well-known dividend discount model and the residual income valuation model, and it adds a linear information model, which is a time series model by nature. Therefore, we adopt the time series approach. In…

General Mathematicsinformation dynamics model (lim)error correction model (ecm):CIENCIAS ECONÓMICAS [UNESCO]0502 economics and businessComputer Science (miscellaneous)Equity valueEconometricsEconomicsresidual income valuation model (rim)Ohlson valuation modeldiscount dividends model (DDM)Engineering (miscellaneous)error correction model (ECM)Clean surplus relationdisplacement property050208 financeError correction modelCointegrationDisplacement propertyconservatism correctionlcsh:Mathematics05 social sciencesUNESCO::CIENCIAS ECONÓMICASresidual income valuation model (RIM)050201 accountinglcsh:QA1-939Valuation (logic)Error correction modelDiscount dividends modelDividend discount modelInformation modeldiscount dividends model (ddm)Income valuation modelclean surplus relationDividendConservatism correctionResidual income valuationinformation dynamics model (LIM)
researchProduct