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Discussion of “On Accounting-Based Valuation Formulae” and “Expected EPS and EPS Growthas Determinants of Value”

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  • Stephen H. Penman

    (Columbia University)

Abstract

This discussion evaluates the abnormal earnings growth valuation (AEG) Model of Ohlson and Juettner-Nauroth and, in similar vein to the Ohlson review paper at this conference, compares the Model to the residual income valuation (RIV) Model that has been the centerpiece of accounting-based valuation in recent years. The discussion begins with a statement of what one looks for in a practical valuation model. The innovations of the AEG Model, well stated by Ohlson, are acknowledged. A comparison of the advantages and disadvantages of the alternative approaches provides some qualification, however, and draws out the utility of a residual income valuation approach.

Suggested Citation

  • Stephen H. Penman, 2005. "Discussion of “On Accounting-Based Valuation Formulae” and “Expected EPS and EPS Growthas Determinants of Value”," Review of Accounting Studies, Springer, vol. 10(2), pages 367-378, September.
    • Handle: RePEc:spr:reaccs:v:10:y:2005:i:2:d:10.1007_s11142-005-1536-2
    DOI: 10.1007/s11142-005-1536-2
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    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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