Using accounting information for consumption planning and equity valuation

• 成果类型: Article; Proceedings Paper
• 署名作者: Yee, Kenton K.
• 署名单位: Columbia University
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-007-9026-3
• 发表日期: 2007
• 页码: 227-256
• 关键词: Cash flows; earnings; RISK; MODEL; accruals; association; uncertainty; prediction; RESOLUTION; arbitrage

摘要

This article develops a consumption-based valuation model that treats earnings and cash flow as complementary information sources. The model integrates three ideas that do not appear in traditional valuation models: (i) earnings provide information about future shocks to cash flow; (ii) earnings contain indiscernible transient accruals; and (iii) investors use cash flow and earnings to make allocation and consumption decisions and set price. Accordingly, the quality of earnings affects production and consumption as well as price. Among other implications, the model reveals that a valuation coefficient is not just a capitalization factor; it is the product of a capitalization factor and a structural factor reflecting earnings quality and accounting bias.