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Business Analysis and Valuation : Using Financial Statements
01 Jan 2010-
TL;DR: In this paper, the authors present a framework for business analysis and valuation using financial statement data. But they focus on the why and how of accounting, rather than the how and why of accounting.
Abstract: This text is divided into concise learning parts that cover both the why and how of accounting. The text introduces and develops a framework for business analysis and valuation using financial statement data.
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TL;DR: A review of tax research can be found in this article, which surveys four main areas of the literature: (1) the informational role of income tax expense reported for financial accounting, (2) corporate tax avoidance, (3) corporate decision-making including investment, capital structure, and organizational form, and (4) taxes and asset pricing.
1,436 citations
TL;DR: In this article, the authors investigated the relationship between corporate social performance (CSP) and corporate financial performance by examining how change in CSP is related to change in financial accounting measures.
Abstract: Stakeholder theory provides a framework for investigating the relationship between corporate social performance (CSP) and corporate financial performance. This relationship is investigated by examining how change in CSP is related to change in financial accounting measures. The findings provide some support for a tenet in stakeholder theory which asserts that the dominant stakeholder group, shareholders, financially benefit when management meets the demands of multiple stakeholders. Specifically, change in CSP was positively associated with growth in sales for the current and subsequent year. This indicates that there are short-term benefits from improving CSP. Return on sales was significantly positively related to change in CSP for the third financial period, indicating that long-term financial benefits may exist when CSP is improved.
960 citations
TL;DR: In this paper, the authors provide an empirical assessment of the residual income valuation model proposed in Ohlson (Ohlson, J.A., 1995) and find that the key original empirical implications of the model stem from the information dynamics that link current information to future residual income.
949 citations
TL;DR: The authors investigated the relationship between poor governance and poor returns, and found that firms with weak shareholders' rights exhibit significant operating underperformance and that the market is negatively surprised by the poor operating performance of weak governance firms.
Abstract: We investigate Gompers, Ishii, and Metrick’s (2003) finding that firms with weak shareholder rights exhibit significant stock market underperformance. If the relation between poor governance and poor returns is causal, we expect that the market is negatively surprised by the poor operating performance of weak governance firms. We find that firms with weak shareholder rights exhibit significant operating underperformance. However, analysts’ forecast errors and earnings announcement returns show no evidence that this underperformance surprises the market. Our results are robust to controls for takeover activity. Overall, our results do not support the hypothesis that weak governance causes poor stock returns. WHETHER CORPORATE GOVERNANCE AFFECTS FIRM PERFORMANCE is a matter of much study and debate. In an important and widely cited recent paper, Gompers, Ishii, and Metrick (GIM, 2003) find for the period 1990 to 1999 that firms with strong shareholder rights have risk-adjusted stock returns that are 8.5% higher per year than those of firms with weak shareholder rights. A puzzling feature of the paper is that the authors find persistent stock market underperformance for firms with weak shareholder rights, but they do not find significant underperformance in firm operating performance, which they measure with accounting
761 citations
TL;DR: In this paper, the authors investigate Gompers, Ishii, and Metrick's (2003) finding that firms with weak shareholders rights exhibit significant stock market underperformance, and they find no evidence that this underperformance surprises the market.
Abstract: We investigate Gompers, Ishii, and Metrick's (2003) finding that firms with weak shareholder rights exhibit significant stock market underperformance. If the relation between poor governance and poor returns is causal, we expect that the market is negatively surprised by the poor operating performance of weak governance firms. We find that firms with weak shareholder rights exhibit significant operating underperformance. However, analysts' forecast errors and earnings announcement returns show no evidence that this underperformance surprises the market. Our results are robust to controls for takeover activity. Overall, our results do not support the hypothesis that weak governance causes poor stock returns. This is a revised version of a paper previously titled 'Does Weak Governance Cause Weak Stock Returns? An Examination of Firm Operating Performance and Analysts' Expectations' that was originally posted on April 21, 2004.
704 citations