Determinants of the length of time a firm’s book-to-market ratio is greater than one
Tóm tắt
This paper examines the factors associated with the length of time that a firm’s market value is below its book value. From 1990 to 2010, approximately 19 % of firm quarter observations have a market value below their book value, and 46 % experience a market value below its below book value for more than 1 year. I investigate firm characteristics—accounting aggressiveness, asset liquidity, debt covenants, and cash flows; firm actions—merger, liquidation or an internal adaptation of resources; and accounting rules and their association with the length of time a firm’s book-to-market (BTM) ratio is greater than one. This paper extends the research on the adaptation option and also brings to light the unusual sample of observations that persist with a BTM ratio greater than one.
Tài liệu tham khảo
Aleksanyan M, Karim K (2013) Searching for value relevance of book value and earnings: a case of premium versus discount firms. Rev Quant Financ Acc 41(3):489–511
Altman E (1968) Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. J Financ 23(4):589–609
Ball R, Shivakumar L (2005) Earnings quality in UK private firms: comparative loss recognition timeliness. J Account Econ 39(1):83–128
Ball R, Kothari SP, Robin A (2000) The effect of international institutional factors on properties of accounting earnings. J Account Econ 29(1):1–51
Barth E (1991) Relative measurement errors among alternative pension asset and liability measures. Account Rev 66(3):433–463
Barth E, Beaver W, Landsman W (1992) The market valuation implications of net periodic pension cost components. J Account Econ 15(1):27–62
Barth E, Beaver W, Landsman W (1998) Relative valuation roles of equity book value and net income as a function of financial health. J Account Econ 25(1):1–34
Basu S (1997) The conservatism principle and the asymmetric timeliness of earnings. J Account Econ 24(1):3–37
Beatty A, Weber J, Yu J (2008) Conservatism and debt. J Account Econ 45(2/3):154–174
Beaver W, Landsman W (1983) Incremental information content of Statement 33 disclosures. FASB, Stamford
Beaver W, Ryan S (2000) Biases and lags in book value and their effects on the ability of the book-to-market ratio to predict book return on equity. J Account Res 38(1):127–148
Berger P, Ofek E, Swary I (1996) Investor valuation of the abandonment option. J Financ Econ 42(1):1–31
Breen R (1996) Regression models: censored, sample selected, or truncated data, series: quantitative applications in the social sciences. Sage, Beverly Hills
Burgstahler D, Dichev I (1997) Earnings, adaption, and equity value. Account Rev 72(2):187–215
Collins D, Kothari SP (1989) An analysis of intertemporal and cross-sectional determinants of earnings response coefficients. J Account Res 11(2/3):143–181
Collins D, Pincus M, Xie H (1999) Equity valuation and negative earnings: the role of book value of equity. Account Rev 74(1):29–61
Danielson M, Press E (2003) Accounting returns revisited: evidence of their usefulness in estimating economic returns. Rev Account Stud 8(4):493–530
Duke J, Hunt H (1990) An empirical examination of debt covenant restrictions and accounting-related debt proxies. J Account Econ 12(1):45–63
Dye R, Sridhar S (2008) A positive theory of flexibility in accounting standards. J Account Econ 46(2/3):312–333
Fields T, Lys T, Vincent L (2001) Empirical research on accounting choice. J Account Econ 31(1–3):255–307
Frankel R, Lee C (1998) Accounting valuation, market expectation, and cross-sectional stock returns. J Account Econ 25(3):283–319
Givoly D, Hayn C (2000) The changing time-series properties of earnings, cash flows and accruals: has financial reporting become more conservative? J Account Econ 29(3):287–320
Hayn C (1995) The information content of losses. J Account Econ 20(2):125–153
Henning S, Lewis B, Shaw W (2000) Valuation of the components of purchased goodwill. J Account Res 38(2):375–386
Hirshleifer D, Hou K, Teoh S, Zang Y (2004) Do investors overvalue firms with bloated balance sheets? J Account Econ 38:297–331
Jensen M, Ruback R (1983) The market for corporate control: the scientific evidence. J Financ Econ 11(1):5–50
Krull L (2004) Permanently reinvested foreign earnings, taxes, and earnings management. Account Rev 79(3):745–767
Kwon S, Yin Q, Han J (2006) The effect of differential accounting conservatism on the “over-valuation” of high-tech firms relative to low-tech firms. Rev Quant Financ Acc 27(2):143–173
Landsman W (1986) An empirical investigation of pension fund property rights. Account Rev 61(4):662–691
Marquardt C, Wiedman C (2004) How are earnings managed? An examination of specific accruals. Contemp Account Res 21(2):461–491
Nikolaev V (2010) Debt covenants and accounting conservatism. J Account Res 48(1):51–89
Ohlson J (1995) Earnings, book values, and dividends in equity valuation. Contemp Account Res 11(2):661–687
Oler M (2011) Entrenched management and the adaptation option. Working paper, Virginia Tech University
Oler D, Smith K (2012) The characteristics and fate of firms that publicly seek to be acquired. Investment analysis and portfolio management, vol 6. Elsevier, Amsterdam
Perfect SB, Wiles KW (1994) Alternative constructions of Tobin’s q: an empirical comparison. J Empir Financ 1(3/4):313–341
Petroni K (1992) Optimistic reporting within the property–casualty insurance industry. J Account Econ 15(4):485–508
Ramirez P, Hachiya T (2008) Measuring the contribution of intangibles to productivity growth: a disaggregate analysis of Japanese firms. Rev Pac Basin Financ Mark Policies 11(2):151–186
Riedl E (2004) An examination of long-lived asset impairments. Account Rev 79(3):823–852
Rock S, Sedo S, Willenborg M (2001) Analyst following and count-data econometrics. J Account Econ 30(3):351–373
Schlingemann F, Stulz R, Walkling R (2002) Divestitures and the liquidity of the market for corporate assets. J Financ Econ 64(1):117–144
Shevlin T (1991) The valuation of R&D firms with R&D limited partnerships. Account Rev 66(1):1–21
Sloan R (1996) Do stock prices fully reflect information in accruals and cash flows about future earnings? Account Rev 71(3):289–315
Watts R (2003) Conservatism in accounting part I: explanations and implications. Account Horiz 17(3):207–221
Watts R, Zimmerman J (1986) Positive accounting theory. Pretince-Hall Inc, New Jersey