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Determinants of the length of time a firm’s book-to-market ratio is greater than one

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  • Mitchell Oler

Abstract

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. Copyright Springer Science+Business Media New York 2015

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  • Mitchell Oler, 2015. "Determinants of the length of time a firm’s book-to-market ratio is greater than one," Review of Quantitative Finance and Accounting, Springer, vol. 45(3), pages 509-539, October.
    • Handle: RePEc:kap:rqfnac:v:45:y:2015:i:3:p:509-539
    DOI: 10.1007/s11156-014-0445-5
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    More about this item

    Keywords

    Adaptation option; Aggressive accounting; Accounting standards; Conservatism; Debt; Restructuring; G34; M21; M41;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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