Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Stale and scale effects in markets-based accounting research
T2 - evidence from the valuation of dividends
AU - Goncharov, Igor
AU - Veenman, David
PY - 2014
Y1 - 2014
N2 - This study revisits prior research on the valuation of dividends in an accounting-based valuation framework. Using a battery of tests, we show that market value deflation is essential in market-based tests of dividend displacement and signalling because it controls for 'stale' information in addition to scale (size) differences across firms. For US firms, we show that after controlling for 'stale' information, the empirical association between dividends and market values switches from positive to negative. This switch is not explained by scale differences across firms. Further, we show that after controlling for staleness, the valuation of dividends remains positive for European firms. This result is explained by the relatively stronger association of dividends with future earnings in these settings (i.e. signalling). Lastly, our country-specific estimates of dividend valuation provide a potentially valuable index for studies aimed at examining the effects of accounting and securities regulation on information asymmetries in an international context.
AB - This study revisits prior research on the valuation of dividends in an accounting-based valuation framework. Using a battery of tests, we show that market value deflation is essential in market-based tests of dividend displacement and signalling because it controls for 'stale' information in addition to scale (size) differences across firms. For US firms, we show that after controlling for 'stale' information, the empirical association between dividends and market values switches from positive to negative. This switch is not explained by scale differences across firms. Further, we show that after controlling for staleness, the valuation of dividends remains positive for European firms. This result is explained by the relatively stronger association of dividends with future earnings in these settings (i.e. signalling). Lastly, our country-specific estimates of dividend valuation provide a potentially valuable index for studies aimed at examining the effects of accounting and securities regulation on information asymmetries in an international context.
KW - M41
KW - G12
KW - C10
KW - G14
KW - RESIDUAL INCOME VALUATION
KW - MANDATORY IFRS ADOPTION
KW - VALUE-RELEVANCE
KW - EQUITY VALUATION
KW - INTANGIBLE ASSETS
KW - EMPIRICAL-ANALYSIS
KW - EUROPEAN-UNION
KW - CASH HOLDINGS
KW - STOCK-PRICES
KW - SHARE PRICES
U2 - 10.1080/09638180.2013.795870
DO - 10.1080/09638180.2013.795870
M3 - Journal article
VL - 23
SP - 25
EP - 55
JO - European Accounting Review
JF - European Accounting Review
SN - 0963-8180
IS - 1
ER -