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1 – 10 of 667
Article
Publication date: 1 December 1999

Thomas L. Stober

Outlines the key features of the Ohlson (1995) and Feltham and Ohlson (1995, 1996) models, which relate share values to current accounting numbers, and reviews research on…

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Abstract

Outlines the key features of the Ohlson (1995) and Feltham and Ohlson (1995, 1996) models, which relate share values to current accounting numbers, and reviews research on their empirical application. Identifies some inconsistencies in results and directions for future research.

Details

Managerial Finance, vol. 25 no. 12
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 15 February 2016

Yiming Hu, Xinmin Tian and Zhiyong Zhu

In capital market, share prices of listed companies generally respond to accounting information. In 1995, Ohlson proposed a share valuation model based on two accounting…

Abstract

Purpose

In capital market, share prices of listed companies generally respond to accounting information. In 1995, Ohlson proposed a share valuation model based on two accounting indicators: company residual income and book value of net asset. In 2000, Zhang introduced the thought of option pricing and developed a new accounting valuation model. The purpose of this paper is to investigate the valuation deviation and the influence of some market transaction characteristics on pricing models.

Design/methodology/approach

The authors use listed companies from 1999 to 2013 as samples, and conduct comparative analysis with multiple regression.

Findings

The main findings are: first, the accounting valuation model is applicable to the capital market as a whole, and its pricing effect increases as years go by; second, in the environment of out capital market, the maturity of investors is one of important factors that causes the information content of residual income less than that of profit per share and lower pricing effect of valuation models; third, when the price earning (PE) of listed companies reaches certain level, the overall explanation capacity of accounting valuation models will become lower as PE gets higher; fourth, as for companies with higher turnover rate and more active transaction, the pricing effect of accounting valuation model is obviously lower; fifth, the pricing effect of accounting valuation models in a bull market is lower than in a bear market.

Originality/value

These findings establish connection between accounting valuation and market transaction characteristics providing an explorable orientation for the future development of accounting valuation theories and models.

Details

China Finance Review International, vol. 6 no. 1
Type: Research Article
ISSN: 2044-1398

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Article
Publication date: 17 April 2009

Day‐Yang Liu, Kuo‐An Tseng and Szu‐Wei Yen

The purpose of this paper is to examine the validity of the Ohlson model and to explore the influence of intellectual capital (IC) on corporate value (V) and value…

2210

Abstract

Purpose

The purpose of this paper is to examine the validity of the Ohlson model and to explore the influence of intellectual capital (IC) on corporate value (V) and value creation (VC) in order to develop a business valuation model served as the managerial criterion of IC.

Design/methodology/approach

Hypotheses are based on current research on the Ohlson model and IC. Descriptive statistics are used to find the data patterns. Information content and incremental information provided by various capital sources are validated through multiple and stepwise regression.

Findings

Corporate value is measured by both IC and financial capital (FC). The Ohlson model with FC reveals information that is significant in corporate value. Besides, FC and IC – mainly, innovation and human capital – contains a great deal of incremental information in terms of V and VC.

Research limitations/implications

In addition to financial statement, IC must be taken into account when intending to do business valuation.

Practical implications

To create higher corporate value, corporations must actively place a high premium on their IC and manage it well, particularly for innovation and human capital.

Originality/value

This paper focuses on the information technology industry in Taiwan. It, respectively, uses the share price and price and book value models to represent V and VC. It cites the more complete four aspects of IC, which are referred to as “other information”, to combine IC and the Ohlson model.

Details

Journal of Intellectual Capital, vol. 10 no. 2
Type: Research Article
ISSN: 1469-1930

Keywords

Article
Publication date: 23 May 2008

Alex Faseruk and Alex Faseruk

The purpose of this paper is to survey the accounting concepts of valuation and the direction of accounting research in terms of development of valuation models. It also…

3869

Abstract

Purpose

The purpose of this paper is to survey the accounting concepts of valuation and the direction of accounting research in terms of development of valuation models. It also simulates some of the models. Moreover, the Dividend Discount Model, a financial model, is the foundation of a number of accounting based models and is discussed.

Design/methodology/approach

The objectives are achieved by surveying the literature for accounting models and empirical evidence for the model. The methodology also incorporates simulating the models under different conditions to find out the valuation predicted.

Findings

It was found out that the accounting models predict that accrual principles play a role in increasing the discrepancy between the book value and the market value of equity. Some of the recent valuation models, like the Feltham–Ohlson linear information model, incorporate accrual principles like conservatism. Though the empirical evidences are mixed for these models, it provides a theoretical framework to incorporate accrual principles in the accounting valuation models.

Practical implications

This paper provides practitioners with a snapshot of different models and their limitations.

Originality/value

This paper provides a comprehensive picture of the state of accounting valuation models and provides input for further development of these models.

Details

Management Research News, vol. 31 no. 6
Type: Research Article
ISSN: 0140-9174

Keywords

Article
Publication date: 1 October 2006

G.E. Swartz, N‐P. Swartz and S. Firer

The debate on the determinants of firm value is ongoing; and the increasing gap in the book‐to‐market ratio (Lev & Sougiannis 1999) has yet to be explained in the…

Abstract

The debate on the determinants of firm value is ongoing; and the increasing gap in the book‐to‐market ratio (Lev & Sougiannis 1999) has yet to be explained in the financial literature. This article contributes to the debate by examining whether intellectual capital measured using the value added intellectual coefficient (VAICTM) (Pulic 1998) contributes to the explanation of the book‐to‐market ratio. This study used Ohlson’s 1995 valuation model and JSE Securities Exchange (SA) (JSE) data in an attempt to identify whether the book value of assets, accounting (accrual) earnings and VAICTM explain the behaviour of South African share prices. The panel data least squares model results indicate a significant relationship between share prices three months after year end, and abnormal earnings, abnormal cash dividends, book value of assets, the capital employed coefficient, and the human capital coefficient.

Article
Publication date: 1 October 2003

G.A. Karathanassis and S.N. Spilioti

Early theoretical work on equity valuation suggests that equity prices are determined by variables such as dividends and growth in dividends. However, these “traditional”…

661

Abstract

Early theoretical work on equity valuation suggests that equity prices are determined by variables such as dividends and growth in dividends. However, these “traditional” views have been challenged by recent studies that seem to indicate that equity prices are determined by book value and discounted future abnormal earnings. This paper employs panel data methodology and equity prices from Athens Stock Exchange empirically to compare the performance of the traditional and the more recent models of equity valuation. The results show that the performance of the Ohlosn (1995) model is quite similar to that of the traditional models even though in some cases Ohlson’s model performance appears to be superior.

Details

Managerial Finance, vol. 29 no. 9
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 30 September 2014

Varun Dawar

This study aims to investigate the persistence ability of accounting variables, namely, abnormal earnings, book value, accruals and cash flows over a period of time and…

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Abstract

Purpose

This study aims to investigate the persistence ability of accounting variables, namely, abnormal earnings, book value, accruals and cash flows over a period of time and their valuation relevance in Indian scenario.

Design/methodology/approach

The study utilizes the generalized version of the Ohlson model which links market prices with abnormal earnings, book value and earning components (accruals and cash flows). Fixed-effect panel data regression is used to analyze six years of data on the sample units to determine the persistence and valuation relevance.

Findings

The findings provide evidence on the construct of persistence and value relevance of earnings and book value of equity in the Indian context. The findings further confirm that investors in India are fixated on earnings and fail to attend separately to the cash flow and accrual components of earnings while undertaking their investment decisions.

Practical implications

The empirical findings of the study will enable the analysts and investors to understand the relevance and persistence of accounting variables in case of an emerging market like India.

Originality/value

The study extends the extant literature on value relevance studies in developed markets to an emerging market like India and enriches it in several ways.

Details

Journal of Financial Reporting and Accounting, vol. 12 no. 2
Type: Research Article
ISSN: 1985-2517

Keywords

Article
Publication date: 1 December 1999

Mark P. Bauman

Outlines the role of the conservatism inherent in generally accepted accounting principles in Ohlson’s (1995) and Feltham and Ohlson’s (1995) valuation models and compares…

Abstract

Outlines the role of the conservatism inherent in generally accepted accounting principles in Ohlson’s (1995) and Feltham and Ohlson’s (1995) valuation models and compares it with other research findings. Identifies potential sources of conservatism (e.g. expensing advertising costs, providing for deferred tax etc.), develops a mathematical model and applies it to 1980‐1994 US data to examine their relative importance. Finds that intensity of R&D and age of fixed assets are the most significant and goes on to compare the effectiveness of the Feltham/Ohlson conservatism parameter in capturing this information. Shows that their linear information models seems to capture different aspects of the relationship between book and market values and calls for further research.

Details

Managerial Finance, vol. 25 no. 12
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 12 January 2015

Kuo-An Tseng, Ching-I Lin and Szu-Wei Yen

The purpose of this paper is to investigate the relationship among intellectual capital (IC), financial capital (FC), firm value (V), and value creation (VC) in different…

2297

Abstract

Purpose

The purpose of this paper is to investigate the relationship among intellectual capital (IC), financial capital (FC), firm value (V), and value creation (VC) in different business cycles (BC) for the conduct of strategic management that will maintain stable values and further increase V.

Design/methodology/approach

This research cites ICs as “other information” to combine ICs and the Ohlson model. Information provided by various capitals is validated by multiple regression analysis. Multi-group analysis is performed to test whether the coefficient is moderated by BC.

Findings

Results indicate the significant information of ICs and FC, and the contingency perspective of BC. The value relevance of ICs is moderated by BC. Prosperity has more explanatory capacities, and recession ICs yield more incremental information.

Research limitations/implications

VC is influenced by both ICs and FC. Besides, the macroeconomic situation should also be considered in strategic management and VC management.

Practical implications

In addition to ICs and FC, the macroeconomic situation must be taken into account when conducting strategic management, valuation management, investment decision, or industrial policy.

Social implications

Results indicate a contingency of BC, which can be a reference for enterprises to create higher V, for investors to make appropriate investment, as well as for governments to formulate sound industrial policies.

Originality/value

This paper applies BC to explore the value relevance of ICs and FC, leverages two models to represent V and VC, and cites complete four aspects of IC as “other information” to combine ICs and Ohlson model.

Details

Journal of Intellectual Capital, vol. 16 no. 1
Type: Research Article
ISSN: 1469-1930

Keywords

Book part
Publication date: 24 January 2022

Serdar Yaman and Turhan Korkmaz

Introduction: Financial failure is a concept that may arise from many internal and external factors such as operational, financial, and economic items and may incur…

Abstract

Introduction: Financial failure is a concept that may arise from many internal and external factors such as operational, financial, and economic items and may incur serious losses. Over-indebtedness arising from managerial misjudgments may cause high financial distress, insufficiency, and bankruptcy. In this regard, determination of effects of capital structure decisions on financial failure risk is crucial.

Aim: The main purpose of this study is to explore the relationship between capital structure decisions and financial failure risk. For this purpose, data from Borsa İstanbul (BIST) for listed food and beverage companies for the period from 2004 to 2019 is used. Another purpose of this study is to compare the financial failure models considering capital structure theories.

Method: In the study, capital structure decisions are associated with five different financial ratios; while the financial failure risk is proxied by financial failure scores of Altman (1968), Springate (1978), Ohlson (1980), Taffler (1983), and Zmijewski (1984). Therefore, five different panel data models are used for testing these hypotheses.

Findings: The results of panel data analysis reveal that capital structure decisions have statistically significant effects on financial failure risk for all models; however, those effects vary from one financial failure model to another. Also, the results show that in the models in which financial failure risk is proxied by the Altman (1968) and Taffler (1983) scores, the aggressive financial policies increase the financial failure risk. However, regarding the models in which financial failure risk is proxied by the Springate (1978), Ohlson (1980), and Zmijewski (1984) scores, aggressive financial policies decrease the financial failure risk.

Originality of the Study: To the best of our knowledge, this chapter is original and important in terms of revealing the effects of capital structure decisions on the financial failure risk and comparing the financial failure models.

Implications: The results revealed that the risk of financial failure models represented by Altman (1968) and Taffler (1983) scores are found to be statistically stronger and more successful in meeting theoretical expectations compared to other models. Therefore, it would be more appropriate to refer Altman’s (1968) and Taffler’s (1983) financial failure models in financial failure risk measurements.

Details

Insurance and Risk Management for Disruptions in Social, Economic and Environmental Systems: Decision and Control Allocations within New Domains of Risk
Type: Book
ISBN: 978-1-80117-140-3

Keywords

1 – 10 of 667