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Accounting comparability and the accuracy of peer-based valuation models

Research output: Working paper

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Accounting comparability and the accuracy of peer-based valuation models. / Young, Steven; Zeng, Yachang.
Lancaster University Management School, 2014. p. 1-50 (Department of Accounting and Finance Working Paper Series; No. AF2014/15WP02).

Research output: Working paper

Harvard

Young, S & Zeng, Y 2014 'Accounting comparability and the accuracy of peer-based valuation models' Department of Accounting and Finance Working Paper Series, no. AF2014/15WP02, Lancaster University Management School, pp. 1-50.

APA

Young, S., & Zeng, Y. (2014). Accounting comparability and the accuracy of peer-based valuation models. (pp. 1-50). (Department of Accounting and Finance Working Paper Series; No. AF2014/15WP02). Lancaster University Management School.

Vancouver

Young S, Zeng Y. Accounting comparability and the accuracy of peer-based valuation models. Lancaster University Management School. 2014 Aug 6, p. 1-50. (Department of Accounting and Finance Working Paper Series; AF2014/15WP02).

Author

Young, Steven ; Zeng, Yachang. / Accounting comparability and the accuracy of peer-based valuation models. Lancaster University Management School, 2014. pp. 1-50 (Department of Accounting and Finance Working Paper Series; AF2014/15WP02).

Bibtex

@techreport{66e06b0717f14a0d9c21ff34d45bcc81,
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) and controlling for economic comparability, 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 crossborder 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, IFRS",
author = "Steven Young and Yachang Zeng",
year = "2014",
month = aug,
day = "6",
language = "English",
series = "Department of Accounting and Finance Working Paper Series",
publisher = "Lancaster University Management School",
number = "AF2014/15WP02",
pages = "1--50",
type = "WorkingPaper",
institution = "Lancaster University Management School",

}

RIS

TY - UNPB

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

AU - Young, Steven

AU - Zeng, Yachang

PY - 2014/8/6

Y1 - 2014/8/6

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) and controlling for economic comparability, 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 crossborder 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) and controlling for economic comparability, 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 crossborder 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

KW - IFRS

M3 - Working paper

T3 - Department of Accounting and Finance Working Paper Series

SP - 1

EP - 50

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

PB - Lancaster University Management School

ER -