Accounting comparability and the accuracy of peer-based valuation models
We examine the link between enhanced accounting comparability and the valuation performance of pricing multiples. Using the warranted multiple method proposed by Bhojraj and Lee (2002), we demonstrate how enhanced accounting comparability leads to better peer-based valuation performance. Empirical t...
| Main Authors: | , |
|---|---|
| Other Authors: | |
| Format: | Journal Article |
| Language: | English |
| Published: |
2018
|
| Subjects: | |
| Online Access: | https://hdl.handle.net/10356/87854 http://hdl.handle.net/10220/46889 |
| _version_ | 1811696371918438400 |
|---|---|
| author | Young, Steven Zeng, Yachang |
| author2 | Nanyang Business School |
| author_facet | Nanyang Business School Young, Steven Zeng, Yachang |
| author_sort | Young, Steven |
| collection | NTU |
| description | We examine the link between enhanced accounting comparability and the valuation performance of pricing multiples. Using the warranted multiple method proposed by Bhojraj and Lee (2002), we demonstrate how enhanced accounting comparability leads to better peer-based valuation performance. Empirical tests using firms from 15 European Union (EU) countries over the period 1997–2011 (with comparable peers selected across the entire cross-section of foreign firms) document significant improvement in valuation performance measured as pricing accuracy, the ability of value estimates to explain cross-sectional variation in observed price, and the ability of the pricing multiple to predict future market-to-book multiples. Findings for a series of identification tests suggest that enhanced valuation performance is the consequence of improvements in the degree of cross-border accounting comparability that occurred during the sample window, and that a significant fraction of comparability gain operates through improved peer selection. |
| first_indexed | 2024-10-01T07:38:19Z |
| format | Journal Article |
| id | ntu-10356/87854 |
| institution | Nanyang Technological University |
| language | English |
| last_indexed | 2024-10-01T07:38:19Z |
| publishDate | 2018 |
| record_format | dspace |
| spelling | ntu-10356/878542023-05-19T06:44:41Z Accounting comparability and the accuracy of peer-based valuation models Young, Steven Zeng, Yachang Nanyang Business School Equity Valuation Pricing Multiples DRNTU::Business::Accounting We examine the link between enhanced accounting comparability and the valuation performance of pricing multiples. Using the warranted multiple method proposed by Bhojraj and Lee (2002), we demonstrate how enhanced accounting comparability leads to better peer-based valuation performance. Empirical tests using firms from 15 European Union (EU) countries over the period 1997–2011 (with comparable peers selected across the entire cross-section of foreign firms) document significant improvement in valuation performance measured as pricing accuracy, the ability of value estimates to explain cross-sectional variation in observed price, and the ability of the pricing multiple to predict future market-to-book multiples. Findings for a series of identification tests suggest that enhanced valuation performance is the consequence of improvements in the degree of cross-border accounting comparability that occurred during the sample window, and that a significant fraction of comparability gain operates through improved peer selection. 2018-12-07T09:06:51Z 2019-12-06T16:50:48Z 2018-12-07T09:06:51Z 2019-12-06T16:50:48Z 2015 Journal Article Young, S., & Zeng, Y. (2015). Accounting comparability and the accuracy of peer-based valuation models. The Accounting Review, 90(6), 2571-2601. doi:10.2308/accr-51053 0001-4826 https://hdl.handle.net/10356/87854 http://hdl.handle.net/10220/46889 10.2308/accr-51053 en The Accounting Review © 2015 American Accounting Association (AAA). |
| spellingShingle | Equity Valuation Pricing Multiples DRNTU::Business::Accounting Young, Steven Zeng, Yachang Accounting comparability and the accuracy of peer-based valuation models |
| title | Accounting comparability and the accuracy of peer-based valuation models |
| title_full | Accounting comparability and the accuracy of peer-based valuation models |
| title_fullStr | Accounting comparability and the accuracy of peer-based valuation models |
| title_full_unstemmed | Accounting comparability and the accuracy of peer-based valuation models |
| title_short | Accounting comparability and the accuracy of peer-based valuation models |
| title_sort | accounting comparability and the accuracy of peer based valuation models |
| topic | Equity Valuation Pricing Multiples DRNTU::Business::Accounting |
| url | https://hdl.handle.net/10356/87854 http://hdl.handle.net/10220/46889 |
| work_keys_str_mv | AT youngsteven accountingcomparabilityandtheaccuracyofpeerbasedvaluationmodels AT zengyachang accountingcomparabilityandtheaccuracyofpeerbasedvaluationmodels |