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Consumption, Residual Income Valuation, and Long-run Risk [r-libre/1571]

Bergeron, Claude; Gueyie, Jean-Pierre, & Sedzro, Komlan (2018). Consumption, Residual Income Valuation, and Long-run Risk. Journal of Theoretical Accounting Research, 13 (2), 1-32.

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[img]  PDF - rRlibreJTAR2018HaganSchoolBusiness-NY.pdf
Content : Accepted Version
 
Item Type: Journal Articles
Refereed: Yes
Status: Published
Abstract: This paper develops a theoretical extension of the residual income valuation model that integrates the concept of long-run risk. The model starts with an intertemporal framework, assumes the clean surplus accounting relation, and expresses firm market value as the book value of equity plus the present value of expected future residual income. The main finding of the extension model indicates that a firm’s goodwill is negatively related to its accounting risk, measured by the long-run covariance of the firm’s abnormal earnings growth and aggregate consumption growth. In the context of the residual income valuation method, this finding suggests that the earnings-consumption covariance (in the long run) represents an appropriate accounting risk measurement of a firm’s intrinsic value.
Official URL: https://jtar.org/id4.html
Depositor: Bergeron, Claude
Owner / Manager: Claude Bergeron
Deposited: 21 Nov 2018 16:06
Last Modified: 21 Nov 2018 16:06

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