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Discussion of “Using accounting information for consumption planning and equity valuation”

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  • Peter Ove Christensen

    (University of Aarhus)

Abstract

This paper discusses Yee (2007), who investigates the role of accounting information for consumption planning and equity valuation. Higher earnings quality increases investor welfare and ex ante stock prices as well as the weight on earnings in valuation equations based on both cash flows and earnings. The former is due to improved consumption smoothing through more informed production choices, while the latter is due to the impact on the relative information content of current cash flows versus earnings about future cash flows.

Suggested Citation

  • Peter Ove Christensen, 2007. "Discussion of “Using accounting information for consumption planning and equity valuation”," Review of Accounting Studies, Springer, vol. 12(2), pages 257-269, September.
    • Handle: RePEc:spr:reaccs:v:12:y:2007:i:2:d:10.1007_s11142-007-9034-3
    DOI: 10.1007/s11142-007-9034-3
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    References listed on IDEAS

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    1. Gerald A. Feltham & Peter O. Christensen, 1988. "Firm†specific information and efficient resource allocation," Contemporary Accounting Research, John Wiley & Sons, vol. 5(1), pages 133-169, September.
    2. Verrecchia, Robert E., 2001. "Essays on disclosure," Journal of Accounting and Economics, Elsevier, vol. 32(1-3), pages 97-180, December.
    3. Bengt Holmstrom, 1979. "Moral Hazard and Observability," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 74-91, Spring.
    4. Francis, Jennifer & LaFond, Ryan & Olsson, Per & Schipper, Katherine, 2005. "The market pricing of accruals quality," Journal of Accounting and Economics, Elsevier, vol. 39(2), pages 295-327, June.
    5. Kenton K. Yee, 2007. "Using accounting information for consumption planning and equity valuation," Review of Accounting Studies, Springer, vol. 12(2), pages 227-256, September.
    6. Christensen, Peter O. & Feltham, Gerald A. & Sabac, Florin, 2005. "A contracting perspective on earnings quality," Journal of Accounting and Economics, Elsevier, vol. 39(2), pages 265-294, June.
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