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Using earnings and residual income in the valuation of newly listed firms

Journal of Economics and Business - SPOUDAI

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Title Using earnings and residual income in the valuation of newly listed firms
Using earnings and residual income in the valuation of newly listed firms
 
Creator Νεγκάκης, Χρήστος Ι.
 
Subject Εισόδημα επένδυσης; Κεφαλαιαγορά
Investment income; Capital market
 
Description The present paper uses a set of valuation models which are based on Feltham and Ohlson's
(1995) model, and examines the relationship between Market values (MV), Book values (BV)
Net Income (NI), Residual Income (RI), and Research and Development (RD) expenses over a
sample of newly listed US firms for the period 2000-2004. The purpose is to assess the extent to
which traditional valuation methods remain valid in the new economic settings after the collapse
of international markets in March 2000. Moreover, it is tested if the replacement of RI with NI
in valuation models for newly listed firms potentially reduces information content and
significance. The results indicate that variants of the Feltham and Ohlson's (1995) model, are
able to explain the variation in MV of newly listed firms. Additionally, RI displays no stronger
association than NI with MV of newly listed firms. Last, the results indicate that RD expenditures
and BV enhance the explanatory power of both NI and RI for MV and their inclusion in
valuation models is supported by the present study
 
Publisher University of Piraeus
 
Date 2006-07-01
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
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Format application/pdf
 
Identifier http://spoudai.unipi.gr/index.php/spoudai/article/view/1263
 
Source SPOUDAI - Journal of Economics and Business; Vol 56, No 3 (2006); 7-16
2241-424X
1105-8919
 
Language eng
 
Relation http://spoudai.unipi.gr/index.php/spoudai/article/view/1263/1342
 
Rights Copyright (c) 2006 SPOUDAI - Journal of Economics and Business