IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-03591637.html
   My bibliography  Save this paper

Stock Prices and Implied Abnormal Earnings Growth

Author

Listed:
  • Pascal Alphonse

    (LUMEN - Lille University Management Lab - ULR 4999 - Université de Lille)

  • Michel Levasseur

    (Université de Lille, Droit et Santé)

  • Hafiz Imtiaz Ahmad

    (NYIT - New York Institure of Technology)

Abstract

In terms of corporate valuation, the frequently used heuristics are Price Earnings or Price Earnings to Growth ratios. The development of a valuation model of type Abnormal Earnings Growth Model including modeling of expected rents evolution, conditions compatible with perfect competition, allows us to propose a testable relationship between market value of share, expected earnings per share in a year, its rate of growth in short term and a set of accounting variables composing a synthetic indicator of growth of company. Our results show that (1) expected increase in earnings per share are significantly associated with stock prices for developed countries, (2) but, the persistence of its effects is limited for emerging countries, (3) when the dynamics of growth are more complex, inclusion of synthetic variable of can make a significant correction term (4) and the implied cost of capital is significantly higher for emerging countries than for developed countries.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Pascal Alphonse & Michel Levasseur & Hafiz Imtiaz Ahmad, 2013. "Stock Prices and Implied Abnormal Earnings Growth," Post-Print hal-03591637, HAL.
    • Handle: RePEc:hal:journl:hal-03591637
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Peter D. Easton & Gregory A. Sommers, 2007. "Effect of Analysts' Optimism on Estimates of the Expected Rate of Return Implied by Earnings Forecasts," Journal of Accounting Research, Wiley Blackwell, vol. 45(5), pages 983-1015, December.
    2. Barth, Mary E. & Beaver, William H. & Landsman, Wayne R., 2001. "The relevance of the value relevance literature for financial accounting standard setting: another view," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 77-104, September.
    3. Ohlson, James & Gao, Zhan, 2006. "Earnings, Earnings Growth and Value," Foundations and Trends(R) in Accounting, now publishers, vol. 1(1), pages 1-70, August.
    4. Holthausen, Robert W. & Watts, Ross L., 2001. "The relevance of the value-relevance literature for financial accounting standard setting," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 3-75, September.
    5. Bartov, Eli & Givoly, Dan & Hayn, Carla, 2002. "The rewards to meeting or beating earnings expectations," Journal of Accounting and Economics, Elsevier, vol. 33(2), pages 173-204, June.
    6. Martin Walker & Pengguo Wang, 2003. "Towards an understanding of profitability analysis within the residual income valuation framework," Accounting and Business Research, Taylor & Francis Journals, vol. 33(3), pages 235-246.
    7. Richard P. Brief, 2007. "Accounting Valuation Models: A Short Primer," Abacus, Accounting Foundation, University of Sydney, vol. 43(4), pages 429-437, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Imtiaz Ahmad & Pascal Alphonse & Michel Levasseur, 2011. "Quel est l'impact de la croissance anormale des résultats sur l'évaluation boursière des entreprises ? Une comparaison internationale," Post-Print hal-00645363, HAL.
    2. Tae Choi & Jinchul Jung, 2008. "Ethical Commitment, Financial Performance, and Valuation: An Empirical Investigation of Korean Companies," Journal of Business Ethics, Springer, vol. 81(2), pages 447-463, August.
    3. Yonca Ertimur & Jayanthi Sunder & Shyam V. Sunder, 2007. "Measure for Measure: The Relation between Forecast Accuracy and Recommendation Profitability of Analysts," Journal of Accounting Research, Wiley Blackwell, vol. 45(3), pages 567-606, June.
    4. Rolf Uwe Fülbier & Thorsten Sellhorn, 2023. "Understanding and improving the language of business: How accounting and corporate reporting research can better serve business and society," Journal of Business Economics, Springer, vol. 93(6), pages 1089-1124, August.
    5. Carretta, Alessandro & Farina, Vincenzo & Fiordelisi, Franco & Schwizer, Paola, 2006. "Corporate culture and shareholder value in banking industry," MPRA Paper 8304, University Library of Munich, Germany.
    6. Goncharov, Igor & Werner, Joerg R. & Zimmermann, Jochen, 2009. "Legislative demands and economic realities: Company and group accounts compared," The International Journal of Accounting, Elsevier, vol. 44(4), pages 334-362, December.
    7. McDonough, Ryan P. & Shakespeare, Catherine M., 2015. "Fair value measurement capabilities, disclosure, and the perceived reliability of fair value estimates: A discussion of Bhat and Ryan (2015)," Accounting, Organizations and Society, Elsevier, vol. 46(C), pages 96-99.
    8. Imtiaz Ahmad & Pascal Alphonse & Michel Levasseur, 2010. "Les Effets De La Croissance Et De L'Endettement Sur Les Multiples De Capitaux Propres : Representation Theorique Et Comparaison Internationale," Post-Print hal-00481584, HAL.
    9. Ryan McDonough & Argyro Panaretou & Catherine Shakespeare, 2020. "Fair value accounting: Current practice and perspectives for future research," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 47(3-4), pages 303-332, March.
    10. Terry Shevlin, 2013. "Some personal observations on the debate on the link between financial reporting quality and the cost of equity capital," Australian Journal of Management, Australian School of Business, vol. 38(3), pages 447-473, December.
    11. Michael Neel & Irfan Safdar, 2024. "Financial statement relevance, representational faithfulness, and comparability," Review of Quantitative Finance and Accounting, Springer, vol. 62(1), pages 309-339, January.
    12. Okuns Omokhoje Omokhudu & Peter Okoeguale Ibadin, 2015. "The Value Relevance of Accounting Information: Evidence from Nigeria," Accounting and Finance Research, Sciedu Press, vol. 4(3), pages 1-20, August.
    13. repec:hum:wpaper:sfb649dp2008-028 is not listed on IDEAS
    14. Michel Magnan, 2009. "Fair Value Accounting and the Financial Crisis: Messenger or Contributor?," CIRANO Working Papers 2009s-27, CIRANO.
    15. Ruch, George W. & Taylor, Gary, 2015. "Accounting conservatism: A review of the literature," Journal of Accounting Literature, Elsevier, vol. 34(C), pages 17-38.
    16. Michel Magnan & Haiping Wang & Yaqi Shi(Sans nom), 2016. "Fair Value Accounting and the Cost of Debt," CIRANO Working Papers 2016s-32, CIRANO.
    17. Lavinia Minodora Takacs, 2012. "The Value Relevance Of Earnings In A Transition Economy: Evidence From Romanian Stock Market," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(14), pages 1-8.
    18. Wen, He & Moehrle, Stephen R., 2016. "Accounting for goodwill: An academic literature review and analysis to inform the debate," Research in Accounting Regulation, Elsevier, vol. 28(1), pages 11-21.
    19. Karampinis N. & Hevas D., 2009. "The Effect of the Mandatory Application of IFRS on the Value Relevance of Accounting Data: Some Evidence from Greece," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 73-100.
    20. Wen He & Hwee Cheng Tan & Leon Wong, 2020. "Return windows and the value relevance of earnings," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(3), pages 2549-2583, September.
    21. Tami Dinh Thi & Wolfgang Schultze, 2011. "Capitalizing research & development and ‘other information’: the incremental information content of accruals versus cash flows," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 22(3), pages 241-278, November.

    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-03591637. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.