Abstract:This paper divides the net assets of a company into net operating assets (Equity) and net financial assets on the basis of Ohlson residual income model. Under the assumption that excess surplus income can only be generated from the net operating assets, the account of unearned revenue is selected as an efficient indicator reflecting a company's market position and a new model of value investing theory is built based on market position. Moreover, statistics of Chinese capital market from 2003 to 2011 are used to conduct an empirical analysis to test the adjusted theoretical model. The results show that unearned revenue would significantly affect corporations' equity value as an indicator reflecting its market position. However, an extreme value appears in its influence curve which performs as an inverted U shape. Overall, adjusted model of value investing theory built in this paper has important theoretical and practical significance in improving the development of China's capital market.

The market power of firms can take an important effect on their value through the influence of residual incomes. Based on Ohlson's residual income model (RIM model, also called EBO model), the paper puts financial account-unearned revenue to build the new model, market-power adjusted RIM model. Then we make empirical analysis using the data from 2003 to 2011 year in China capital market. The empirical evidence proofs that unearned revenue has an obvious effect on the value of firms. The result shows that the new model has important complementary role to evaluate the firms' value in China capital market.

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