Unrecorded Intangible Assets: Abnormal Earnings and Valuation

2007 ◽  
Vol 21 (1) ◽  
pp. 23-41 ◽  
Author(s):  
Mark Kohlbeck ◽  
Terry D. Warfield
Keyword(s):  
Banking Industry ◽  
Intangible Assets ◽  
Residual Income ◽  
Equity Valuation ◽  
Analysis Framework ◽  
Valuation Model ◽  
Residual Income Valuation ◽  
The Impact

We use the unique banking industry setting to demonstrate the impact of unrecorded intangible assets on abnormal earnings and equity valuation in the context of the residual income valuation model. We show that the persistence of bank abnormal earnings and, consequently, the pricing multiples on bank abnormal earnings, vary with the level of unrecorded intangible assets. Our evidence suggests that unrecorded intangible assets are important in understanding the persistence and valuation of abnormal earnings in the banking industry. The analysis framework introduced in this paper could also be used to examine the valuation impacts of intangible assets in other industries.

scholarly journals Impact of Corporate Disclosure on Cost of Equity Capital in Vietnam

2017 ◽  
Vol 8 (4) ◽  
pp. 64
Author(s):  
Dung Viet Nguyen ◽  
Lan Thi Ngoc Nguyen
Keyword(s):  
Stock Market ◽  
Equity Capital ◽  
Residual Income ◽  
Corporate Disclosure ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Valuation Model ◽  
Residual Income Valuation ◽  
The Cost ◽  
The Impact

The objective of the paper is to test the impact of corporate disclosure on the cost of equity capital for firms listed on Vietnam’s stock market. We use the Botosan (1997) scoring methodology and the residual income valuation model to measure disclosure level and the implied cost of equity capital. Our findings suggest that, taking into account other determinants, disclosure has a significant reducing impact on the cost of equity capital.

Capital Gains and Dividend Taxes in Firm Valuation: Evidence of Triple Taxation

2000 ◽  
Vol 75 (4) ◽  
pp. 405-427 ◽  
Author(s):  
Julie H. Collins ◽  
Deen Kemsley
Keyword(s):  
Empirical Analysis ◽  
Firm Valuation ◽  
Capital Gains ◽  
Residual Income ◽  
Equity Valuation ◽  
Valuation Model ◽  
Capital Gains Taxes ◽  
Retained Earnings ◽  
Dividend Taxes

Although firms account for entity-level taxes, they do not account for shareholder-level capital gains and dividend taxes. To account for these proprietary-level taxes, we add them to a residual-income equity valuation model. Empirical analysis supports the model's predictions. First, both capital gains and dividend taxes reduce investors' implicit valuation of the reinvested portion of earnings. Second, dividend taxes reduce the valuation of the portion of earnings distributed as dividends, but capital gains taxes do not. Third, dividend taxes reduce the valuation of retained earnings equity, but again, capital gains taxes do not. These findings suggest that investors implicitly extend entity-level accounting to the proprietary level when they value the firm. The findings also suggest that when fully accounting for the effects of implicit dividend taxes, reinvested earnings appear to be subject to three levels of taxation—corporate, dividend, and capital gains taxes. Paying earnings out as dividends eliminates the capital gains layer of tax and may provide a net wealth benefit for shareholders, rather than a tax penalty as commonly assumed.

Valuation of the worldwide commodities sector

2017 ◽  
Vol 34 (4) ◽  
pp. 555-579 ◽  
Author(s):  
Marcelo Bianconi ◽  
Joe Akira Yoshino
Keyword(s):  
Ordinary Least Squares ◽  
Equity Valuation ◽  
Content Type ◽  
Return On Equity ◽  
Value Stocks ◽  
Valuation Model ◽  
Volatility Index ◽  
Growth Stocks ◽  
The Impact ◽  
New Evidence

Purpose This paper aims to empirically investigate the market-to-book/return on equity valuation model. Design/methodology/approach The authors use a worldwide commodities sector panel of 6,323 firms from 69 countries with annual observations from 1999 to 2010 to estimate panel ordinary least squares (OLS), instrumental variables (IV) and quantile regressions. They also measure the impact of return on equity on market-to-book uncovering value versus growth and positive versus negative profitability dimensions. Findings The new evidence is that the impact of return on equity on market-to-book is time-varying and declining across the years in the sample. There is positive and strong persistence in the market-to-book of companies in this sector worldwide, but value stocks are more persistent than growth stocks. The coefficient of return on equity is positive at the 10th percentile of the market-to-book, but it becomes negative for growth stocks at 90th percentiles. Conditional on negative profitability, the coefficient of return on equity on market-to-book is negative for growth stocks. The effect of the S&P500 volatility index (VIX) is negative, significant and large in magnitude, but declines in absolute value, as the quantiles increase toward the upper 90th percentile. Practical implications The commodities sector is important for countries that depend on it for development. Originality/value The paper provides a rich panel data approach, and the market-to-book/return on equity valuation model is naturally applied to the commodities sector, as this sector tends to have more tangibles relative to intangibles.

A Comparative Analysis of Accounting-Based Valuation Models

2016 ◽  
Vol 32 (4) ◽  
pp. 561-575 ◽  
Author(s):  
Kung-Cheng Ho ◽  
Shih-Cheng Lee ◽  
Chien-Ting Lin ◽  
Min-Teh Yu
Keyword(s):  
Stock Prices ◽  
The Other ◽  
Residual Income ◽  
Switching Regression ◽  
Book Value ◽  
Earnings Growth ◽  
Valuation Model ◽  
Pricing Errors ◽  
Residual Income Valuation ◽  
Average Probability

We empirically compare the reliability of the dividend (DIV) model, the residual income valuation (CT, GLS) model, and the abnormal earnings growth (OJ) model. We find that valuation estimates from the OJ model are generally more reliable than those from the other three models, because the residual income valuation model anchored by book value gets off to a poor start when compared with the OJ model led by capitalized next-year earnings. We adopt a 34-year sample covering from 1985 to 2013 to compare the reliability of valuation estimates via their means of absolute pricing errors ( MAPE) and corresponding t statistics. We further use the switching regression of Barrios and Blanco to show that the average probability of OJ valuation estimates is greater in explaining stock prices than the DIV, CT, and GLS models. In addition, our finding that the OJ model yields more reliable estimates is robust to analysts-based and model-based earnings measures.

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