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Accounting comparability and the accuracy of peer-based valuation models

Research output: Contribution to Journal/Magazine › Journal article › peer-review

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Accounting comparability and the accuracy of peer-based valuation models. / Young, Steven; Zeng, Yachang.
In: The Accounting Review, Vol. 90, No. 6, 11.2015, p. 2571-2601.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Young, S & Zeng, Y 2015, 'Accounting comparability and the accuracy of peer-based valuation models', The Accounting Review, vol. 90, no. 6, pp. 2571-2601. https://doi.org/10.2308/accr-51053

APA

Young, S., & Zeng, Y. (2015). Accounting comparability and the accuracy of peer-based valuation models. The Accounting Review, 90(6), 2571-2601. https://doi.org/10.2308/accr-51053

Vancouver

Young S, Zeng Y. Accounting comparability and the accuracy of peer-based valuation models. The Accounting Review. 2015 Nov;90(6):2571-2601. doi: 10.2308/accr-51053

Author

Young, Steven ; Zeng, Yachang. / Accounting comparability and the accuracy of peer-based valuation models. In: The Accounting Review. 2015 ; Vol. 90, No. 6. pp. 2571-2601.

Bibtex

@article{cd936bf06f2a4e71b76e58fd53797dfd,
title = "Accounting comparability and the accuracy of peer-based valuation models",
abstract = "We examine the link between enhanced accounting comparability and the valuation performance of pricing multiples. Using the warranted multiple method proposed by Bhojraj and Lee (2002, Journal of Accounting Research), we demonstrate how enhanced accounting comparability leads to better peer-based valuation performance. Empirical tests using firms from 15 EU countries over the period 1997-2011 (with comparable peers selected from the entire cross-section of foreign firms) document significant improvement in valuation performance measured as pricing accuracy, the ability of value estimates to explain cross-sectional variation in observed price, and the ability of the pricing multiple to predict future market-to-book multiples. Findings for a series of identification tests suggest that enhanced valuation performance is the consequence of improvements in the degree of cross-border accounting comparability that occurred during the sample window, and that a significant fraction of comparability gain operates through improved peer selection.",
keywords = "Equity valuation, pricing multiples, warranted multiple, peer selection, international accounting convergence",
author = "Steven Young and Yachang Zeng",
year = "2015",
month = nov,
doi = "10.2308/accr-51053",
language = "English",
volume = "90",
pages = "2571--2601",
journal = "The Accounting Review",
issn = "0001-4826",
publisher = "American Accounting Association",
number = "6",

}

RIS

TY - JOUR

T1 - Accounting comparability and the accuracy of peer-based valuation models

AU - Young, Steven

AU - Zeng, Yachang

PY - 2015/11

Y1 - 2015/11

N2 - We examine the link between enhanced accounting comparability and the valuation performance of pricing multiples. Using the warranted multiple method proposed by Bhojraj and Lee (2002, Journal of Accounting Research), we demonstrate how enhanced accounting comparability leads to better peer-based valuation performance. Empirical tests using firms from 15 EU countries over the period 1997-2011 (with comparable peers selected from the entire cross-section of foreign firms) document significant improvement in valuation performance measured as pricing accuracy, the ability of value estimates to explain cross-sectional variation in observed price, and the ability of the pricing multiple to predict future market-to-book multiples. Findings for a series of identification tests suggest that enhanced valuation performance is the consequence of improvements in the degree of cross-border accounting comparability that occurred during the sample window, and that a significant fraction of comparability gain operates through improved peer selection.

AB - We examine the link between enhanced accounting comparability and the valuation performance of pricing multiples. Using the warranted multiple method proposed by Bhojraj and Lee (2002, Journal of Accounting Research), we demonstrate how enhanced accounting comparability leads to better peer-based valuation performance. Empirical tests using firms from 15 EU countries over the period 1997-2011 (with comparable peers selected from the entire cross-section of foreign firms) document significant improvement in valuation performance measured as pricing accuracy, the ability of value estimates to explain cross-sectional variation in observed price, and the ability of the pricing multiple to predict future market-to-book multiples. Findings for a series of identification tests suggest that enhanced valuation performance is the consequence of improvements in the degree of cross-border accounting comparability that occurred during the sample window, and that a significant fraction of comparability gain operates through improved peer selection.

KW - Equity valuation

KW - pricing multiples

KW - warranted multiple

KW - peer selection

KW - international accounting convergence

U2 - 10.2308/accr-51053

DO - 10.2308/accr-51053

M3 - Journal article

VL - 90

SP - 2571

EP - 2601

JO - The Accounting Review

JF - The Accounting Review

SN - 0001-4826

IS - 6

ER -