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This study examines the value relevance of recognised and disclosed revaluations of land and buildings for a large sample of Australian firms from 1993 through 1997. In contrast to prior research, we control for risk and cyclical effects and find no difference between recognised and disclosed revaluations, using yearly‐cross‐sectional and pooled regressions and using both market and non‐market dependent variables. We also find only weak evidence that revaluations of recognised and disclosed land and buildings are value relevant.

According to the market timing theory, firms try to take advantage of windows of opportunity to raise capital by exploiting temporary cost fluctuations of alternative financing sources. In this context, the main objective of this paper is to examine the influence and persistence of market timing in the financing decisions of Brazilian firms that launched IPOs in the period from 2001 to 2011.

We analyze the influence of past market values on the capital structure of these firms, based on the main models proposed by Baker and Wurgler (2002), adapted to reflect the characteristics of Brazilian firms’ financial statements.

We find evidence of market timing, but this behavior is not sufficiently persistent in the period studied to the point of determining these firms’ capital structure. We believe the fact that Brazilian companies rarely carried out follow-on primary equity issues after floating their capital in the period analyzed, due to the presence of more advantageous financing sources (particularly from the national development bank, BNDES), explains the results. Therefore, Brazilian firms appear to be pay heed to different funding sources, in search of windows of opportunity, to guide their financing decisions and determine their capital structures.

The Brazilian capital market has been developing intensely in recent years, making it increasingly relevant to analyze the financing and investment decisions of the country’s listed companies. The Brazilian literature on capital structure is extensive, but few works have addressed the issue of market timing.

This paper aims to empirically investigate the market-to-book/return on equity valuation model.

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.

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.

The commodities sector is important for countries that depend on it for development.

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.

This paper examines whether earnings and its components are relevant and sufficient to bridge the gap between banks' market and book values, and also considers if bank efficiency is “value relevant” for banks valuation.

This paper follows the value relevance literature methodology which tests for the difference between book and market values using a variety of indicators including net income and its components as well as bank efficiency (derived using DEA) and risk indicators. The regression models are estimated using OLS, random and fixed effects approaches for a sample of listed Jordanian banks between 1993 and 2004.

The main findings of this paper are twofold. First, it is found that earnings (and its components) are value relevant and explain the gap between market and book values. Secondly, cost efficiency, as an economic performance measure, provides incremental information, not contained directly in banks financial statements, to the market. Overall it is found that the components of net income are more important than aggregate net income in explaining bank value. Furthermore, bank operational efficiency adds incremental information in explaining the gap between market and book value. These results support the view that stock prices aggregate signals received by the market as well as from firm's accounting systems.

The study shows that bank efficiency indicators (along with more traditional accounting measures) help explain market values.

This is one of only a limited number of studies that link bank efficiency to market valuation. It is the first, we believe, to do this for banks operating in an emerging economy.

This study examines the five-factor model of Fama and French (2015) on the French stock market by comparing it to the Fama and French (1993)’s base model. The new Fama and French five-factor model directed at capturing two new factors, profitability and investment in addition to the market, size and book to market premiums. The pricing models are tested using a time-series regression and the Fama and Macbeth (1973) methodology. The regularities in the factor’s behavior related to market conditions and to the sovereign debt crisis in Europe are also examined. The findings of Fama and French (2015) for the US market are confirmed on the Paris Bourse. The results show that both models help to explain some of the stock returns. However, the five-factor model is better since it has a marginal improvement over the widely used three-factor model of Fama and French (1993). In addition, the investment risk premium seems to be better priced in the French stock market than the profitability factor. The results are robust to the Fama and Macbeth (1973) methodology. Moreover, profitability and investment premiums are not affected by market conditions and the European sovereign debt crisis.

The purpose of the paper is to offer some advancing in the understanding of the market-to-book value (MBV) gap (or ratio) as the symptom and the metrics for intellectual capital (IC) value, and to discuss the major criticisms against it. The original contribution of the paper lies in developing the analysis of the meaning of the MBV from a theory-of-the-firm perspective. Such an approach is employed to shed light on the two sides of MBV: book and market values.

The paper reviews research on MBV and the theory of the firm, employing a deductive approach that explores criticisms and advantages of the use of the MBV gap as the symptom and the metrics of IC according to a specific theory of the firm.

The paper finds that the presumption that an “accounting fallacy” exists, which refers to the gap between market and book values, must be revised depending on the chosen theory of the firm. In fact, depending on the theory of the firm to which IC scholars refer, book value could not necessarily equate to market value, even if the latter was unbiased. Again, market value could not be able to express the value of IC.

Implications of the paper are mainly for improving consistency in research, but they also support practice for consciousness and awareness. Limitations are the following. First, the paper offers an analysis of just three selected theories of the firm. Second, the analysis is based on a deductive reasoning that can be criticised for results even if not for the aim. Third, one could feel that an IC-centred theory of the firm does not yet exist at all.

Once reasons for abandoning the misbelief that accounting standards should be set in order to close the gap are highlighted, research on IC can move towards more appropriate goals. On the basis of the criticism presented in the paper, empirical research, which makes use of market and book data, could be carried out in a much more consistent way in relation to theoretical background. The paper highlights how the use of the MBV approach can lead to mistakes without a clear reference to the theory of the firm.

The paper focuses on the meaning of the MBV from a theory-of-the-firm perspective, assisting the researcher in avoiding potential mistakes and inconsistencies in their work, and also suggesting some consequences on the practice of IC.

The purpose of this paper is to investigate whether investors value the future growth from acquisitions and the subsequent realisations thereof accurately.

The paper calculates conventional and adjusted market-to-book ratios and investigates abnormal cumulative returns over 20 quarters after portfolio formation for a sample of Standard & Poor’s 500 firms using a hedge portfolio and regression approach.

Hedge portfolios formed using adjusted market-to-book ratios underperform conventional hedge portfolios over a five-year period. Dividing the hedge into its comprising elements reveals that the underperformance of the adjusted hedge is mainly caused by weaker returns from value firms.

Findings are specific to large firms in a specific setting, and future research is needed to determine if findings are equally applicable to other situations. Findings imply that investors underrate the growth from new acquisitions and overrate the extent to which this has materialised.

The paper highlights that the extrapolation of future growth rates should be carefully considered in any equity valuation of a firm with current or past acquisitions.

This paper shows that inaccurate valuation of the growth of new acquisitions and the realisation thereof is at least partially responsible for the value versus growth phenomenon. It shows that the accounting information could be improved and highlights the importance of extrapolating past growth rates with care.

Daniel and Titman (1997) contend that the Fama‐French three‐factor model’s ability to explain cross‐sectional variation in expected returns is a result of characteristics that firms have in common rather than any risk‐based explanation. The primary aim of the current paper is to provide out‐of‐sample tests of the characteristics versus risk factor argument. The main focus of our tests is to examine the intercept terms in Fama‐French regressions, wherein test portfolios are formed by a three‐way sorting procedure on book‐to‐market, size and factor loadings. Our main test focuses on ‘characteristic‐balanced’ portfolio returns of high minus low factor loading portfolios, for different size and book‐to‐market groups. The Fama‐French model predicts that these regression intercepts should be zero while the characteristics model predicts that they should be negative. Generally, despite the short sample period employed, our findings support a risk‐factor interpretation as opposed to a characteristics interpretation. This is particularly so for the HML loading‐based test portfolios. More specifically, we find that: the majority of test portfolios tend to reveal higher returns for higher loadings (while controlling for book‐to‐market and size characteristics); the majority of the Fama‐French regression intercepts are statistically insignificant; for the characteristic‐balanced portfolios, very few of the Fama‐French regression intercepts are significant.

The purpose of this paper is to investigate the connection between the accrual quality and the growth/value characteristics (and their return premia) at firm level.

The paper employs a battery of univariate and multivariate cross‐sectional tests. Fama‐MacBeth regressions with main effects and interaction effects are used to identify the relation between accrual quality, book‐to‐market and returns. The analysis is conducted on the overall sample, as well as after conditioning on up and down markets.

Value (growth) stocks are more likely to be associated with high (low) accrual quality. Value stocks earn higher returns mainly in down markets, while poor accrual quality firms have significantly higher returns during up markets, but significantly lower returns during down markets. There is a significant interaction effect between accrual quality and the value premium, which only exhibits in the down markets (i.e. stocks with poor accrual quality earn a higher value premium in down markets than stocks with good accrual quality).

Results in this paper help disentangle between various explanations proposed for the accrual quality premium and the value premium. These findings are consistent with the idea that the same underlying risk factor generating the value premium also generates the cross‐sectional variation in accrual quality responsible for the accrual quality premium. From the corporate managers' perspective, the results imply that value firms can mitigate their higher costs of capital by providing high quality of accounting information. From an analyst's perspective, the study suggests that considering both accrual quality and growth characteristics can help make better portfolio allocation decisions than when these are considered separately.

This study documents that high book‐to‐market (value) and low book‐to‐market (glamour) stock prices react asymmetrically to both common and firm‐specific information. Specifically, we find that value stock prices exhibit a considerably slow adjustment to both common and firm‐specific information relative to glamour stocks. The results show that this pattern of diferential price adjustment between value and glamour stocks is mainly driven by the high arbitrage risk borne by value stocks. The evidence is consistent with the arbitrage risk hypothesis, predicting that idiosyncratic risk, a major impediment to arbitrage activity, amplifies the informational loss of value stocks as a result of arbitrageurs’ (informed investors) reduced participation in value stocks because of their inability to fully hedge idiosyncratic risk.