International equity valuation: the relative importance of country and industry factors versus company‐specific financial reporting information |
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Authors: | George Foster Ron Kasznik Baljit K Sidhu |
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Institution: | 1. Graduate School of Business, Stanford University, Stanford, CA 94305, USA;2. School of Accounting, University of New South Wales, Sydney, NSW 2052, Australia |
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Abstract: | The relative importance of country‐ and industry‐specified factors vis‐à‐vis company‐specific financial statement–based information in explaining equity valuation multiples in an international setting is examined. Both country‐specific effects via previously identified variables and an indicator variable approach are analysed. While company‐specific factors are predominant in explaining cross‐sectional differences in valuation, country and industry factors have sizable incremental explanatory power over them; the latter are not independent, so their relative importance is influenced by how we adjust for this commonality. Using country indicators provides larger incremental explanatory power than using country‐specific factors, suggesting that previously identified factors may be measured with sizeable error or omitted factors are important. |
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Keywords: | Accounting harmonisation Financial reporting International equity valuation Country factors Industry factors M41 G12 G14 |
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