By Guochang Zhang
The objective of this publication is to provide a extra systematic and dependent remedy of the study on accounting‐based valuation, with a prime concentrate on contemporary theoretical advancements and the ensuing empirical analyses that realize the position of accounting info in making managerial decisions.
Since its inception, valuation study in accounting has advanced basically alongside an “empirically pushed” direction. within the absence of types built in particular to provide an explanation for this subject, researchers have depended on financial instinct and theories from different disciplines (mainly finance and economics) as a foundation for designing empirical analyses and reading findings. even supposing this literature has shed very important mild at the usefulness of accounting details in capital markets, it's noticeable that the inability of a rigorous theoretical framework has hindered the institution of a scientific and well‐structured literature and made it tricky to probe valuation matters extensive.
More lately, although, growth has been made at the theoretical entrance. the 2 so much widespread frameworks are (i) the “linear info dynamic process” and (ii) the “real options‐based technique” which acknowledges managerial makes use of of accounting info within the pursuit of price new release. This quantity devotes its preliminary chapters to an review of the types utilizing the linear dynamic process, after which offers a synthesis of the theoretical stories that undertake the true suggestions technique and the empirical works which draw on them. The publication additionally attempts to revisit and critique current empirical examine (value-relevance and earnings-response reviews) in the actual options-based framework. it really is was hoping that the publication can heighten curiosity in integrating theoretical and empirical learn during this box, and play a task in supporting this literature turn into a extra established and cohesive physique of labor.
Value is of final hindrance to fiscal decision-makers, and valuation thought may still function a platform for learning different accounting subject matters. The ebook ends with a decision for elevated hyperlinks of alternative parts of accounting study to valuation theory.
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Extra info for Accounting Information and Equity Valuation: Theory, Evidence, and Applications
In a world where accounting plays a nontrivial role in communicating business activities to investors, self-correction is not plausible. 285). More fundamentally, however, investors’ interpretation of accounting data is entirely unaffected by the method of measurement or, putting it another way, they do not rely on accounting data at all in financial forecasting. In justifying such an assertion, one might argue that investors are not necessarily fooled by the “appearance” of accounting data; for example, they can correct for the effect of using one method rather than another.
1777). An introduction to merchandize. Edinburgh. Holthausen, R. , & Watts, R. L. (2001). The relevance of value relevance. Journal of Accounting and Economics, 31(1–3), 3–75. Kay, J. A. (1976). Accountants, too, could be happy in a golden age: The accountant’s rate of profit and the internal rate of return. Oxford Economic Papers, 28(3), 447–460. Kothari, S. P. (2001). Capital markets research in accounting. Journal of Accounting and Economics, 31(1–3), 105–231. , & Lys, T. (2000). The Ohlson model: Contributions to valuation theory, limitations, and empirical applications.
MM’s message is that in a perfect capital market, given a firm’s investment activity, investors are indifferent to one particular dividend policy versus another. For any given dividend policy, investors who do not like it can simply adjust their investment portfolios to achieve the desired cash position. For example, investors who prefer to hold more cash than the amount of dividends paid by the firm can produce “homemade” dividends by selling a portion of their ownership. Conversely, investors who prefer to hold less cash can purchase more shares to increase their investment.
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