The Valuation of MNC International Operations During the 1990s

We investigate how international operations affected firm value during the early 1990s. We also investigate whether the disclosures of foreign operations in specific geographic regions under SFAS No. 14 provide investors with useful information beyond disclosure of aggregate foreign operations. We find that in the early 1990s, investors do not value international operations as highly as domestic operations, and that geographic region disclosures are not useful for conveying information about the specific location and magnitude of the firm's operations. This latter finding supports the recent FASB decision that eliminated the requirement that firms break out foreign operating statistics by geographic region.     

The Long-Term Price-Earnings Ratio

Abstract:  The price-earnings effect has been thoroughly documented and is the subject of numerous academic studies. However, in existing research it has almost exclusively been calculated on the basis of the previous year's earnings. We show that the power of the effect has until now been seriously underestimated due to taking too short-term a view of earnings. Looking at all UK companies since 1975, using the traditional P/E ratio we find the difference in average annual returns between the value and glamour deciles to be 6%. This is similar to other authors' findings. We are able to almost double the value premium by calculating the P/E ratio using earnings averaged over the previous eight years.     

The Aggregation and Valuation of Deferred Taxes

Review of Accounting Studies - This paper clarifies some of the conflicting arguments about the value relevance of deferred taxes. We address two questions. First, does accounting aggregation hold,...     

Survey and Market-based Evidence of Industry-dependence in Analysts' Preferences Between the Dividend Yield and Price-earnings Ratio Valuation Models

Prior research has shown that analysts' preferred valuation models are the price-earnings (PE) ratio and the dividend yield. This paper presents strong evidence that the relative importance of these two models varies according to stock market sector. Companies in the services, industrials and consumer goods sectors are shown to be 'PE-valued' while financials and utilities companies are shown to be 'yield-valued'. These findings are derived from survey research and then tested in a market-based model. This use of independent, mutually reinforcing research methods contributes to the robustness of the findings.     

The Valuation of Deferred Taxation: Evidence from the UK Partial Provision Approach

The UK provides a virtually unique environment in which to examine the information content of the partial provision approach to deferred tax accounting. In addition this issue is of particular interest to UK accounting standard setters in the light of trends towards international accounting standard harmonisation. Taking the total amount of deferred taxation to be equal to the partial balance sheet provision plus the potential portion appearing in the notes, this study tests the relationship between these various deferred tax components and market value. It also examines the economic rationale for the potential portion. The study is based on 1,512 company/years from the period 1989–1991. It finds that, while the full amount of deferred taxation is not valued by the market as a liability, there is evidence of the partial balance sheet provision being so valued. There is also evidence that the potential portion is positively related to market value, consistent with its proxying for information about future growth. This result is supported by the positive relation between the potential portion and measures of future capital spending, indicative of an underlying economic rationale for this deferred taxation component. From a regulatory perspective, the study concludes that the main benefit of the partial provision approach is that the balance sheet amount constitutes a reasonably reliable measure of the portion likely to crystallise as a liability, information that would be lost were only the full amount to be disclosed.     

Change in Inventory and Firm Valuation

This study examines the effect of the informativeness of change in inventory on firm valuation. A firm's change in inventory is informative if its percentage change in cost of goods sold is positively and significantly associated with its lag one percentage of production added to inventory (a measure of change in inventory). Sample firms are divided into two groups: firms with informative change in inventory, and other firms. Analyses then are performed to examine the association between stock price and earnings. Results consistently show that the association is higher for firms with informative change in inventory. Thus, knowledge on the informativeness of change in inventory is useful for firm valuation.     

Income Smoothing, Earnings Quality and Firm Valuation

Abstract:   This study argues that lower variability of earnings does not guarantee income smoothers' higher firm values. Instead, smoothers' earnings should be more value‐relevant if they are of high quality, i.e., earnings quality should be considered simultaneously. Sample firms are divided into four groups: quality earnings smoothers, quality earnings non‐smoothers, non‐quality earnings smoothers, and non‐quality earnings non‐smoothers. Value relevance of reported earnings is then studied using both the levels and the changes approaches with indicator variables. Results show quality earnings smoothers have the highest price‐earnings multiple while non‐quality non‐smoothers have the lowest price‐earnings multiple.     

Linear Accounting Valuation When Abnormal Earnings Are AR(2)

The Ohlson (1995) model assumes that abnormal earnings follow an AR(1) process primarily for reasons of mathematical tractability. However, the empirical literature on the Garman and Ohlson (1980) model finds that the data support an AR(2) lag structure for earnings, book values and dividends. Moreover, the AR(2) process encompasses a far richer variety of time series patterns than does the AR(1) process and includes the AR(1) process as a special case. This paper solves the Ohlson model directly for an AR(2) abnormal earnings dynamic. The model is estimated on a time series firm-level basis following the approach used by Myers (1999). It is found that, like the Ohlson AR(1) model, the Ohlson AR(2) model severely underestimates market prices even relative to book values. These results further bring into question the empirical validity of the Ohlson model.     

新兴产业估值方法国际比较与实证

估值是定价的基础,新兴产业由于自身的特点,在估值和定价发行方面存在较大的困难。本文对新兴产业的估值与定价问题展开研究,对现在市场主流的估值方法进行了对比,结合新兴产业估值特点,在传统PEG模型基础上发展出风险调整PEG模型,也即PEGX。它比PEG指标更全面地反映新兴行业企业的成长性和风险性。文章结合国内外资本市场进行了案例分析,通过实证检验验证了模型的有效性,更适用于对我国的新兴产业进行估值。文章认为,可以通过与PE模型及其他绝对估值模型结合,使用该模型对新股上市定价的合理性进行评估。由于PEGX模型更加强调新兴产业的风险性,用该模型进行定价分析时,可以有效缓解对高增长企业给予盲目的高估值定价。     

The Pricing of Dividends in Equity Valuation

Abstract:   This study uses Ohlson's (1995 and 2001 ) accounting‐based equity valuation model to structure tests of four explanations for the anomalously positive pricing of dividends reported by Rees (1997) and Fama and French (1998) . First, we find that dividends are not simply a proxy for publicly available information that helps predict future abnormal earnings. Second, although dividends act as if they signal managers' private information about future profitability, they remain positively priced for firms with low incentives to signal. Third, dividends do not signal management's willingness to abstain from incurring agency costs. Fourth, however, controlling for one‐year‐ahead realized forecast errors yields a pricing of dividends that is very close to that of dividend displacement. After showing that dividends are not simply a proxy for analysts' misforecasting, we conclude that dividends appear to be positively priced because they are a proxy for the mispricing by investors of current earnings or book equity.     

The Articulation of Returns and Accounting-Related Variables when Returns Lead Earnings: UK Evidence

This paper constructs a simple setting in which economic returns always lead accounting earnings. It then uses this setting to explore analytically the likely effect of 'returns leading earnings' on the properties of the market-to-book ratio, accounting profitability, the price-earnings ratio and profitability persistence. The analysis predicts that 'returns leading earnings' will tend to drive up the level of each of the three accounting-related ratios and will generate certain patterns of association between those ratios. Analysis of data from a sample of UK companies supports many of the predictions.     

The Valuation of Structured Products: Empirical Findings for the Swiss Market

This article analyses the valuation of 192 structured products without a capital guarantee. In contrast to similar studies, this investigation takes in both the primary and the secondary market. Its central element is a comparison of the implied volatilities of the options contained in the structured products with those of comparable EUREX options. Generally speaking, the results may well come as a surprise both concerning the scale of the phenomenon detected and its significance. Taken as a whole, the results provide grounds for assuming that certain inefficiencies exist on the Swiss market for structured products and that lead managers manage to exploit their quasi-monopolistic position in a rational manner. JEL Classification G13     

Valuation of Callable Warrants

A simple valuation model for callable warrants is derived and tested. The model is expressed in closed form except for one term which can be evaluated numerically. Predictions of 78 warrant prices are compared to market prices and the average error is -.224 percent. By contrast, the Black-Scholes model applied to the same warrants produces an average error of 31.44 percent. Thus the callability feature cannot safely be ignored in determining warrant values.     

Debt,Diversification, and Valuation

The separate associations between financial leverage and valuation and between diversification and valuation have been widely researched. The joint function of leverage, diversification, and valuation, however, has received much less attention. Previous research shows that compared to specialized firms, diversified firms tend to have higher free cash flows and fewer high net present value investment opportunities. Consequently, the agency costs associated with potential overinvestment are greater for diversified firms. The literature also proposes that financial leverage should reduce agency costs. Consequently, we expect that the values of diversified firms increase with leverage. Our tests provide strong support for the hypothesis that the values of diversified firms increase with leverage. This tendency is not observed for specialized firms.JEL Classification:     

The Transitory Nature of Negative Earnings and the Implications for Earnings Prediction and Stock Valuation

The value-irrelevance of losses largely results from the transitory nature of losses and the diminished relationship between current and future earnings. This study develops a sales-based model of future normal earnings that is useful in analyzing future earnings prospects of loss firms. Results indicate that the developed model is associated with future earnings realizations and current stock price and is shown to be incrementally value-relevant (with book value) in price regressions for loss firms. Investigation of the relative valuation role of the prediction model provides evidence that the model is associated with equity value for loss firms expected to survive.     

The Impact of Dividends, Debt and Investment on Valuation Models

The reliability of a basic earnings and equity model of value is tested using 8,287 cases drawn from UK industrial and commercial firms reporting during 1987–1995. A respecification of this model is used to investigate the value relevance of dividends, capital structure and capital expenditure. Both the dividend and capital expenditure signals appear to be significant and the impact of the former is surprisingly strong. There is no convincing evidence that equity value is affected by the level of debt. Further investigation of dividends confirms that they are less influential in large firms or in firms with high return on equity.     

不确定性下创意企业价值评估分析

文章从产品产业化过程的角度出发对创意产业企业不确定性进行了分析,归纳出创意产业企业的不确定性来源。鉴于不确定性的复杂性和创意产业的实物期权特征,以及对企业价值评估模型的讨论,改进了Schwartz-Moon期权模型,对创意产业企业价值进行评估。从连续时间和离散时间两种情况出发,构建了创意产业企业预期收入与企业现金流模型,在此基础上,讨论了可变成本、产权收入和公司产品的价值损失三个变量与创意产业的企业价值的关系,并在考虑税率的情况下构建企业税后净收入模型以全面考察创意产业企业价值。     

商标权价值评估方法的优化

我国目前对企业无形资产评估中采用收益法比较常见,收益法利用企业无形资产超额收益折现来估值,但无形资产带来的超额收益是企业所有无形资产带来的,那么如何分割企业商标权带来的超额收益就显得尤为重要,这正是商标权价值评估的难点所在。通过对传统评估方法和国外评估方法的比较分析,提出利用层次分析法解决这一难点,通过对方法的介绍和优化,提出了优化商标权评估方法的具体操作步骤,总结了各层次之间详尽的指标。     

Simplified Valuation of Single-Payoff Financial Instruments

Cheung and Chung (1996) presented a set of four basic components that can be used to reconstruct piecewise linear payoff diagrams associated with single-payoff instruments. Arbitrage arguments indicate that this provides a method to value complex financial instruments as the sum of the values of their underlying basic components. We present a modified scheme using two hybrid components which were constructed so that each piecewise linear segment can be replicated independently. This leads to a simple algorithm that is amenable to quick computer implementation.     

资源类上市公司的价值评估方法探讨

现有“利润加储量”的评估方法应用于资源类公司仍在某些环节出现悖论。本文认为，资源类上市公司的价值构成应包括矿权重估溢价、正常开采投资收益及个别公司的超额利润。其中，采矿权重估溢价的潜在收益应是在矿权未市场化之前的资源类企业获得的特有收益，但其收益期和相应的折现期也因矿权的逐步市场化而受到采矿权有效期的限制。本文用简单模型估算了主要资源类上市公司的基本价值。