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Gerald Feltham, James Ohlson (1999)
Residual Earnings Valuation With Risk and Stochastic Interest RatesThe Accounting Review, 74
James Ohlson (1995)
Earnings, Book Values, and Dividends in Equity Valuation*Contemporary Accounting Research, 11
J. Francis, Per Olsson, D. Oswald (2000)
Comparing the Accuracy and Explainability of Dividend, Free Cash Flow, and Abnormal Earnings Equity Value EstimatesJournal of Accounting Research, 38
James Ohlson (1990)
A Synthesis of security valuation theory and the role of dividends, cash flows, and earnings*Contemporary Accounting Research, 6
Penman Penman, Sougiannis Sougiannis (1998)
A comparison of dividend, cash flow, and earnings approaches to equity valuationContemporary Accounting Research, 15
(2000)
Valuation : Measuring and Managing the Value of Companies
J. Miles, J. Ezzell (1980)
The Weighted Average Cost of Capital, Perfect Capital Markets, and Project Life: A ClarificationJournal of Financial and Quantitative Analysis, 15
Patricia Dechow (1994)
Accounting earnings and cash flows as measures of firm performance : The role of accounting accrualsJournal of Accounting and Economics, 18
Lucie Courteau, J. Kao, G. Richardson (2000)
The Equivalance of Dividend, Cash Flows and Residual Earnings Approaches to Equity Valuation Employing Ideal Terminal Value ExpressionsAlberta: General Management (Topic)
This paper examines why practitioners and researchers get different estimates of equity value when they use a discounted cash flow (CF) model versus a residual income (RI) model. Both models are derived from the same underlying assumption — that price is the present value of expected future net dividends discounted at the cost of equity capital — but in practice and in research they frequently yield different estimates. We argue that the research literature devoted to comparing the accuracy of these two models is misguided; properly implemented, both models yield identical valuations for all firms in all years. We identify how prior research has applied inconsistent assumptions to the two models and show how these seemingly small errors cause surprisingly large differences in the value estimates.
Contemporary Accounting Research – Wiley
Published: Jun 1, 2001
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