Searching for value relevance of book value and earnings: a case of premium versus discount firms

Aleksanyan, Mark; Karim, Khondkar E.

doi:10.1007/s11156-012-0318-8

Cited by 11 publications

(6 citation statements)

References 41 publications

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“…Other studies have examined the impact of various contextual factors on the value relevance of accounting information in various countries such as accounting practices in six Asian countries [23], investor protection in many countries [24], macro factors and bank-level factors in many countries [25], premium/discount firms in the United States [26], intellectual capital or intangible assets in Taiwan [27], improvements in working capital efficiency in Malaysia [3], financial crisis in Turkey [4], and adoption of international financial reporting standards (IFRS) in Norway [28], in Europe [29], in China [30], and in Indonesia [8].…”

Section: Value Relevance Of Financial Statementsmentioning

confidence: 99%

Sustainability Reporting and Value Relevance of Financial Statements

et al. 2018

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This study examines whether information about the winners of the Sustainability Reporting Award (SRA) contributes to the usefulness of the information in financial statements. This study used a sample consisting of 110 winners of SRA (SRA firms) and 110 companies that did not receive SRA (non-SRA firms) from 2008 to 2016. The study found that earnings per share (EPS), earnings per share change (EPSC), and book value per share (BVPS) are value-relevant information. Results of comparison between SRA firms and non-SRA firms show that the positive association between EPS and stock price (P) and the positive association of EPS with stock returns (R) for SRA firms are higher than that for the non-SRA firms. In addition, findings of this study indicate that EPSC is positively associated with R when EPSC and R are measured by Indonesian rupiah (IDR) instead of by percentage, and the positive association between EPSC and R for the SRA firms is higher than that for the non-SRA firms. Thus, the results are sensitive to measures of the variables. However, this study found that value relevance of BVPS for SRA firms is lower than for non-SRA firms. Implication of this study is that information about the winners of SRA contributes to the usefulness of financial statements, especially the information of EPS and EPSC.

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Section: Value Relevance Of Financial Statementsmentioning

confidence: 99%

Sustainability Reporting and Value Relevance of Financial Statements

et al. 2018

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“…3 Of course, the results may be specific to the sampling period or be driven by the use of inefficient deflator for the estimation of accounting-based valuation models (García Lara et al 2009;Gil-Alana et al 2011). As a future research it could be interesting to examine whether the performance of the RS model is more pronounced in some subsamples such as loss-firms, firms with more conservative accounting, firms that belong to some specific industries, discount firms (Aleksanyan and Karim 2013). Also, this kind of analysis could reveal if the coefficients based on the RS models vary across different subsamples.…”

Section: Discussionmentioning

confidence: 99%

A regime switching Ohlson model

Leccadito

Veltri

2014

Qual Quant

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This paper proposes a regime-switching version of the Ohlson model (Contemp Account Res 11:661-687, 1995). We assume that abnormal earnings and the other information variable follow a regime-switching dynamics, which represents a simple yet rigorous way to incorporate the stochastic volatility pattern revealed by financial variables. We derive closed form formulae for market values of equity and show that the resulting model is still tractable. In our empirical investigation we consider firms from the USA stock market during the period 1980-2011 and find that the regime-switching model improves upon the traditional Ohlson model in predicting market prices.

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“…He discovered that the Collins et al (1997) specification could account for practically significant associations to equity share prices during both periods. Aleksanyan and Karim (2013), on the other hand, utilised a pooled cross-sectional regression model to investigate the value relevance of the earnings and equity book value of companies whose share prices traded at a "premium" to equity book values (premium companies) against those whose share prices traded at a "discount" to equity book values (discount companies), as well as the differences between profit-making premium and discount companies' value relevance against their loss-making premium and discount counterparts. They reported an R-squared of 39.5% for the profit-making premium companies, compared to 31.8% for the loss-making premium companies, an R-squared value of 71.6% for profit-making discount companies and 72.2% for loss-making discount companies.…”

Section: Summationmentioning

confidence: 99%

The explanatory value of intrinsic equity valuation models for share price variations: A survey of recent approaches

2023

ISEA

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Over the past six decades, a considerable amount of research has been conducted to better understand the explanatory ability of intrinsic equity valuation models to account for variations in equity share prices or returns, in which the accounting-based Ohlson residual income valuation framework has been the primary focus. Meanwhile, several variants of this model have emerged, the foremost of which typically comprises the decomposition of the Ohlson residual income variable into substitute accounting earnings variables, such as the traditional bottom-line earnings variable or, more recently, alternative earnings performance measures, of which earnings before interest, tax, depreciation and amortisation (EBITDA) is a particular case in point. However, there appears to be a lack of consensus about the variables of interest and the most appropriate model to define the predicted interconnections between accounting values and share prices or share price returns. In light of this lack of accord, the aim of this study was to examine the recent literature with regard to the approaches and evidence pertaining to the Ohlson model and the recent variants thereof that are based either on traditional or alternative earnings performance measures, with a view to answering the following research questions: 1. Which econometric model results in the best explanation of the association between accounting information and share prices? 2. Consequently, which variable, when combined with equity book values, seems to provide the most persuasive evidence of association with equity share prices: EBITDA, earnings or residual income? To answer these questions, a systematic literature review was conducted. The criteria were that the studies had to have at least two explanatory variables of interest in accounting for share price variations or returns, with one of them being equity book values and the other being any earnings performance measure, such as residual income, earnings, EBITDA, or combinations involving transformations of these. The review entailed a critical evaluation of the methodologies, model specification and model output against the reported findings, inferences and conclusions. The results revealed that the original Ohlson (1995) model, the Collins et al. (1997) and the recent EBITDA variations yielded equally valid demonstrations of the association of accounting information with share price variations. Consequently, depending on the choice of model, all three variables, EBITDA, earnings and residual income, appear to possess an equal amount of explanatory power to account for variations in equity share prices. The study's major contribution is to clarify the explanatory power of Ohlson-based models and the specification of variables, as well as methodological and analysis issues that could inform future research in the field.

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Searching for value relevance of book value and earnings: a case of premium versus discount firms

Cited by 11 publications

References 41 publications

Sustainability Reporting and Value Relevance of Financial Statements

Sustainability Reporting and Value Relevance of Financial Statements

A regime switching Ohlson model

The explanatory value of intrinsic equity valuation models for share price variations: A survey of recent approaches

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