scholarly journals The Value Relevance of Earnings and Book Value Using an Option-Style Equity Valuation Model: Evidence from Korea

2009 ◽  
Vol 4 (12) ◽  
Author(s):  
Gee Jung Kwon
Keyword(s):  
Value Relevance ◽  
Equity Valuation ◽  
Book Value ◽  
Valuation Model ◽  
Model Evidence

scholarly journals The Effect Of Other Information On Equity Valuation: Kuwait Evidence

2011 ◽  
Vol 27 (6) ◽  
pp. 57 ◽  
Author(s):  
Osama M. Al-Hares ◽  
Naser M. AbuGhazaleh ◽  
Ayman E. Haddad
Keyword(s):  
Value Relevance ◽  
Accounting Information ◽  
Equity Valuation ◽  
Accounting Data ◽  
Potential Implication ◽  
Book Value ◽  
Current Accounting ◽  
Valuation Model ◽  
Other Information ◽  
Linear Information

Previous studies on the value relevance of accounting information adopt Ohlsons linear information dynamics which, if other information is ignored, leads to a theoretical valuation model solely involving earnings, book value, and net shareholder cash flows or (net dividends). The lack of analysis of other value-relevant data may defeat the effectiveness of the Ohlsons model since the current accounting data cannot fully account for future earnings. The potential implication of ignoring other information is that it could introduce bias into estimated coefficients (e.g. Ohlson, 1995; Hand and Landsman, 2005). This study examines the effect of introducing other information proxied by lagged valuation error on equity valuation, utilizing a sample of non-financial companies listed at the Kuwait Stock Exchange (KSE) over the period 2003 to 2009. Empirical results of this study reveal that our proxy for other information appears to capture valuation implications of information other than current variables in the linear information dynamic setting. Results also reveal that adding other information to the valuation model clearly reduces the coefficients on earnings and dividends, and increases the coefficient of book value; however, book value and earnings remain significantly associated with stock prices. As a consequence, current accounting variables appear to be capturing some, but not all, of other information when this variable is omitted. We conclude that other information is an important factor in determining the market value of firms and hence should not be omitted in studies examining the value relevance of accounting information.

scholarly journals Investigation on the value relevance of accounting information: evidence from incorporated companies in the Singapore capital market

2016 ◽  
Vol 13 (3) ◽  
pp. 9-21 ◽  
Author(s):  
Basil Abeifaa Der ◽  
Petr Polak ◽  
Masairol Masri
Keyword(s):  
Earnings Management ◽  
Cash Flow ◽  
Capital Market ◽  
Value Relevance ◽  
Accounting Information ◽  
Book Value ◽  
Valuation Model ◽  
Long Run ◽  
Short Run ◽  
Asset Turnover

The purpose of this study is to investigate the relative, incremental and the systematic changes in value relevance of the accounting information. This study also attempts to investigate the effect of earnings management on the value relevance of accounting information. It basically uses Ohlson’s (1995) valuation model to test the conceptual framework. The findings of this paper reveal that book value is more value relevant and incremental followed by earnings and, then, cash flow. Cash flow, however, performs a lesser valuation role. The results also show that combined book value and earnings are more value relevant than combined book value and cash flow. As a third contribution, the paper also finds that the value relevance of some accounting variables has increased over time, while others showed no evidence of their inclined or declined patterns in the value relevance of accounting information. Finally, the paper finds that earnings management has no effect on the value relevance of accounting information. Further analyses suggest that earnings management is opportunistic in the short run, but efficient in the long run, when firms are small or have high asset turnover

The Value Relevance of Financial and Non-Financial Information

2017 ◽  
pp. 220-245 ◽  
Author(s):  
Amitav Saha ◽  
Sudipta Bose
Keyword(s):  
Value Relevance ◽  
Market Value ◽  
Financial Information ◽  
Market Valuation ◽  
Future Directions ◽  
Book Value ◽  
Research Framework ◽  
Market Values ◽  
Valuation Model ◽  
Different Types

Value-relevance research is an important domain of modern capital market research. Accounting researchers have used the value-relevance research framework in many ways with the aim of measuring whether accounting information has a predicted association with equity market values. One of the most widely used models in value-relevance research is a modification of the Ohlson (1995) market valuation model in which the market value of a firm's equity is presumed to be a function of its book value of equity and abnormal earnings. Furthermore, using the Ohlson (1995) model, accounting researchers have documented the value relevance of different types of financial and non-financial information. Drawing on a selected number of recently published studies that have documented the value relevance of different types of financial and non-financial information, this chapter reviews and integrates recent findings, highlighting challenges and providing future directions for further research in this area.

scholarly journals Is Comprehensive Income Superior To Net Income In Equity Valuation? Evidence From The Capital Market Of Kuwait

2019 ◽  
Vol 35 (4) ◽  
pp. 97-108 ◽  
Author(s):  
Mostafa Elshamy ◽  
Husain Y. Alyousef ◽  
Jassem Al-Mudhaf
Keyword(s):  
Financial Reporting ◽  
Value Relevance ◽  
Stock Exchange ◽  
Explanatory Power ◽  
Equity Valuation ◽  
Net Income ◽  
Comprehensive Income ◽  
Valuation Model ◽  
Other Comprehensive Income ◽  
Gains And Losses

The study examines whether comprehensive income numbers reported under International Financial Reporting Standards (IFRS) have value relevance over net income in equity valuation. We use a sample of firms that are listed in Kuwait Stock Exchange from banking, investment, real estate, industrial, basic materials, telecommunications, consumer services, oil & gas and health care sectors during the years 2012-2015.The study applies a methodology used by Collins, Maydew and Weiss (1997) that is based on Ohlson (1995) equity valuation model and Theil (1971) technique to measure and compare the relative and the incremental explanatory power of comprehensive income and net income. The study provides evidence that comprehensive income is not superior to net income in equity valuation. Reporting other comprehensive income gains and losses as elements of the income statement produces a measure of earnings that decreases the explanatory power of the valuation model; decreases the incremental information content of earnings. Other comprehensive income gains and losses when added as an explanatory variable to the valuation model did not enhance significantly its explanatory power.The results we obtained supports the current requirement by the IFRS and US GAAP of deferring other comprehensive gains and losses and contributes to the literature on the value relevance of other comprehensive income gains and losses in emerging capital markets.

scholarly journals Negative Earnings In International Equity Valuation

2011 ◽  
Vol 8 (3) ◽  
Author(s):  
Kathy H. Y. Hsu ◽  
Harlan L. Etheridge
Keyword(s):  
Value Relevance ◽  
Equity Valuation ◽  
International Capital Markets ◽  
Book Value ◽  
Incremental Value ◽  
Relative Value ◽  
International Equity ◽  
National Boundaries ◽  
Loss Firms ◽  
Negative Earnings

The openness of international capital markets has encouraged investors to look beyond their own national boundary for investment opportunities. Foreign direct investment flow has increased in recent years around the world in all major and emerging markets. International equity valuation, as a result, has gained much attention from practitioners and academic researchers alike. Motivated by evidence that the price-earnings relation is not homogeneous across profit and loss firms and by the growing body of international accounting literature that documents and compares the value relevance of earnings and book value across national boundaries, this study illustrates the potential impact of negative earnings (loss firms) on comparing the relative value relevance of earnings and book value across national boundaries. Our results show that removal of negative earnings observations (1) changes the total value relevance of earnings and book value combined (2) changes the relative value relevance of earnings and book value within each country in our study, and (3) changes the relative incremental value relevance of earnings (book value) between the two countries in the study.

scholarly journals Value relevance of accounting data and financial crisis in Europe: an empirical analysis

2012 ◽  
Vol 2 (2) ◽  
pp. 201 ◽  
Author(s):  
Alain Devalle
Keyword(s):  
Financial Crisis ◽  
Positive Impact ◽  
Value Relevance ◽  
Net Income ◽  
Accounting Data ◽  
Book Value ◽  
Crisis Period ◽  
Comprehensive Income ◽  
The Impact ◽  
The Relationship

This paper aims at verifying the relationship between book value and  market value for a four years period (2006-2009) in Europe, under IFRS. In particular, I used value relevance approach to measure whether net income or comprehensive income are more useful to understand the relationship between market data and financial data. Moreover, the paper analyzes the impact of financial crisis on the value relevance of accounting data. The examination period runs from a pre-crisis period (2006-2007) to an in-crisis period (2008-2009). Results shows that comprehensive income is more value relevant than net income. Furthermore, the financial crisis has a positive impact on value relevance.  

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