Firm valuation, abnormal earnings, and mutual funds flow |
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| Authors: | John J Maher Robert M Brown Raman Kumar |
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| Institution: | (1) Department of Accounting and Information Systems, Pamplin College of Business, Virginia Tech, Blacksburg, VA 24061, USA;(2) Department of Finance, Pamplin College of Business, Virginia Tech, Blacksburg, VA 24061, USA |
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| Abstract: | We examine the valuation effects of overall demand for corporate equities combined with the influence of abnormal earnings
and unexpected funds flow. Our results indicate that the expected and unexpected net new total flow of funds into all stock
mutual funds do not by themselves have a meaningful effect on firm equity valuation. However, we find the combination of unexpected
funds flow and realized abnormal earnings have significant and important valuation effects. Importantly, the valuation impact
is greatest for those firms with high earnings growth potential that also operate in an environment characterized by high
information asymmetry.
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| Keywords: | Abnormal earnings Valuation Mutual funds flow Accounting earnings |
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