A theoretical analysis connecting conservative accounting to the cost of capital

• 成果类型: Article
• 署名作者: Penman, Stephen; Zhang, Xiao-Jun
• 署名单位: University of California System; University of California Berkeley; Columbia University
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2019.101236
• 发表日期: 2020
• 关键词: common-stocks; earnings; RISK; valuation; GROWTH; models; return; yield; firm

摘要

We connect conservative accounting to the cost of capital by developing an accounting model within an asset pricing framework. The model has three distinctive features: (1) transaction-cycle-conformity, where the book value equals the value of cash at the beginning and the end of a cash-to-cash transaction cycle; (2) a revenue recognition principle, where uncertainty affects the amount of revenues recognized; (3) a matching principle, where expenses are matched with revenue with a conservative bias due to uncertainty. We demonstrate how the growth rate of expected earnings, the accruals-to-cash ratio, and the expected earnings yield relate to the expected stock return. (C) 2019 Elsevier B.V. All rights reserved.