Access the full text.
Sign up today, get DeepDyve free for 14 days.
The latter case is feasible even with an underlying fixed book value since the growth in the operating assets can be offset by growth in "bonds payable
H. Stekler, O. Morgenstern (1950)
On the Accuracy of Economic Observations.Journal of the American Statistical Association, 45
James Ohlson (1991)
The theory of value and earnings, and an introduction to the Ball‐Brown analysis*Contemporary Accounting Research, 8
A full payout policy permits growth in operating assets via borrowing, which reduces financial assets
Gabriel Preinreich (1938)
Annual Survey of Economic Theory: The Theory of DepreciationEconometrica, 6
(1957)
Business Valuation, Goodwill and the Super-Profit Method
This observation is due to Ram Ramakrishnan
Preinreich Preinreich (July 1937)
Goodwill in AccountancyJournal of Accountancy, 93
(1938)
The Law of Goodwill
K. Peasnell (1981)
On Capital Budgeting And Income MeasurementAbacus, 17
C. Stickney, R. Weil (1976)
Financial accounting: An introduction to concepts, methods, and uses
T ->
R. Fowler, John Canning (1933)
The economics of accountancyEconomica
(1968)
Accounting Research Study #10: Accounting for Goodwill
A. Paul (1965)
SAMUELSON, . Proof that properly anticipated prices fluctuate randomly, Industrial Management Review, ., 6
(1986)
Structural Models of the Pnce to Earnings Relation: Mea.surement Errors in Accounting Earnings
(1995)
A . Valuation and Clean Surplus Accounting for Operating and Financial Activities
Merton Miller (1958)
The Cost of Capital, Corporation Finance and the Theory of InvestmentThe American Economic Review, 48
Merton Miller, F. Modigliani (1961)
DIVIDEND POLICY, GROWTH, AND THE VALUATION OF SHARESThe Journal of Business, 34
2 = 0, then Bi = 0 and the sign of gg depends uniquely on the sign of •OIQ. On the other hand, if cop > 0, then BT > 0 and the sign of go depends on both
(1929)
for an illustration of this approach. References Canning
Donald Chase (1964)
ON THE ACCURACY OF ECONOMIC OBSERVATIONS
W. Paton, A. Littleton (1940)
An introduction to corporate accounting standards
The possibility of EQ[OX"] > 0 but EQ[OX"^] < 0, some T > 1, implies an exceptional case of oscillations since there also exists some T > x such that EQ
Gerald Feltham, James Ohlson (1996)
Uncertainty resolution and the theory of depreciation measurementJournal of Accounting Research, 34
James Ohlson (1995)
Earnings, Book Values, and Dividends in Equity Valuation*Contemporary Accounting Research, 11
E. Edwards, P. Bell (1962)
The Theory and Measurement of Business Income
(1989)
Accounting Eamings, Book Value and Dividends: The Theory of the Clean Surplus Equation (Part I)
(1991)
An Introduction to Concepts, Methods, and Use.t (Sixth Edition)
K. Peasnell (1982)
SOME FORMAL CONNECTIONS BETWEEN ECONOMIC VALUES AND YIELDS AND ACCOUNTING NUMBERSJournal of Business Finance & Accounting, 9
Abstract. This paper models the relation between a firm's market value and accounting data concerning operating and financial activities. Book value equals market value for financial activities, but they can differ for operating activities. Market value is assumed to equal the net present value of expected future dividends, and is shown, under clean surplus accounting, to also equal book value plus the net present value of expected future abnormal earnings (which equals accounting earnings minus an interest charge on opening book value). A linear model specifies the dynamics of an information set that includes book value and abnormal earnings for operating activities. Model parameters represent persistence of abnormal earnings, growth, and accounting conservatism. The model is sufficiently simple to permit derivation of closed form expressions relating market value to accounting data and other information. Three kinds of analyses develop from the model. The first set deals with value as it relates to anticipated realizations of accounting data. The second set examines in precise terms how value depends on contemporaneous realizations of accounting data. The third set examines asymptotic relations comparing market value to earnings and book values, and how earnings relate to beginning of period book values. The paper demonstrates that in all three sets of analyses the conclusions hinge on the extent to which the accounting is conservative as opposed to unbiased. Further, the absence/presence of growth in operating activities is relevant if, and only if, the accounting is conservative. Résumé. Les auteurs présentent sous forme de modèle la relation entre la valeur marchande d'une entreprise et les données comptables relatives à ses activités d'exploitation et ses activités financières. La valeur comptable est égale à la valeur marchande lorsqu'il s'agit d'activités financières, mais elle peut être différente dans le cas des activités d'exploitation. Les auteurs supposent que la valeur marchande est égale à la valeur actualisée nette des dividendes futurs prévus et démontrent que, lorsqu'on applique la méthode du résultat global, la valeur marchande est aussi égale à la valeur comptable additionnée de la valeur actualisée nette des bénéfices extraordinaires futurs prévus (qui sont égaux aux bénéfices comptables diminués de frais d'intérêt implicites sur la valeur comptable nette). Un modèle linéaire précise la dynamique d'un ensemble de données, incluant la valeur comptable et les bénéfices extraordinaires, relatives aux activités d'exploitation. Les paramètres du modèle traduisent la persistance des bénéfices extraordinaires, la croissance et le principe de prudence. Le modèle est suffisamment simple pour permettre de dériver des expressions fermées qui mettent en relation la valeur marchande et les données comptables et autres. Du modèle se dégagent trois formes d'analyses. La première porte sur la valeur, dans sa relation avec la matérialisation anticipée des données comptables. La deuxième porte sur l'examen précis du lien entre la valeur et la matérialisation actuelle des données comptables. Enfin, la troisième porte sur l'examen des relations asymptotiques à travers lesquelles se comparent la valeur marchande, d'une part, et les bénéfices et la valeur comptable, d'autre part, ainsi que sur la façon dont les bénéfices se rattachent aux valeurs comptables du début de l'exercice. Les auteurs établissent que dans les trois formes d'analyses, les conclusions s'orientent vers la mesure dans laquelle, dans le domaine comptable, l'accent est mis sur la prudence par opposition à l'impartialité. En outre, l'absence ou la présence de croissance dans les activités d'exploitation n'est pertinente que si et seulement si le principe de prudence est appliqué à la comptabilité.
Contemporary Accounting Research – Wiley
Published: Mar 1, 1995
Read and print from thousands of top scholarly journals.
Already have an account? Log in
Bookmark this article. You can see your Bookmarks on your DeepDyve Library.
To save an article, log in first, or sign up for a DeepDyve account if you don’t already have one.
Copy and paste the desired citation format or use the link below to download a file formatted for EndNote
Access the full text.
Sign up today, get DeepDyve free for 14 days.
All DeepDyve websites use cookies to improve your online experience. They were placed on your computer when you launched this website. You can change your cookie settings through your browser.