The Relationship between Accounting Indicators and Market Value of Russian Companies with Different Growth Potential

Ekaterina A. Vorobeva; Egor D. Nikulin

doi:10.21638/spbu18.2018.405

Авторы

Ekaterina A. Vorobeva Graduate School of Management, St. Petersburg University, Russia
Egor D. Nikulin Graduate School of Management, St. Petersburg University, Russia https://orcid.org/0000-0003-0475-3424

DOI:

https://doi.org/10.21638/spbu18.2018.405

Аннотация

The paper investigates relationship between accounting and market indicators of Russian companies. The goal of the paper is to test the hypothesis that the power of companies’ book value and earnings in explaining market value varies across Russian firms with different growth potential. Empirical study was carried out on the basis of 41 Russian traded companies that provided financial reports in accordance with international financial reporting standards (IFRS) for 2007–2013. These companies were divided into three groups using price-to-earnings indicator: with high, medium and low growth potential. The linear regression model based on the Ohlson’s theoretical model was tested both on the whole sample of companies and on each subsample, the latter constituting a piece-wise linear function (growthbased model, GBM). The results of the tests show that GBM shows better accuracy in predicting companies’ market capitalization than basic linear model. This result contributes to the stream of literature on non-linear equity valuation and provides insights for valuing Russian companies.

Ключевые слова:

market capitalization, book value, earnings, valuation, growth potential

Скачивания

Данные скачивания пока недоступны.

Библиографические ссылки

REFERENCES

Ashbaugh H., Olsson P. 2002. An exploratory study of the valuation properties of cross-listed firms’ IAS and U.S. GAAP earnings and book values. Accounting Review 77 (1): 107–126.

Ashton D., Cooke T., Tippett M. 2003. An aggregation theorem for the valuation of equity under linear information dynamics. Journal of Business Finance and Accounting 30 (3–4): 413–440.

Ataullah A., Higson A., Tippett M. 2006. Real (adaptation) options and the valuation of equity: Some empirical evidence. Abacus 42 (2): 236–265.

Ataullah A., Rhys H., Tippett M. 2009. Non-linear equity valuation. Accounting and Business Research 39 (1): 57–73.

Barth M. E., Beaver W. H., Landsman W. R. 2001. The relevance of the value relevance literature for financial accounting standard setting: Another view. Journal of Accounting and Economics 31 (1–3): 77–104.

Bernard V. L. 1995. The Feltham-Ohlson framework: Implications for empiricists. Contemporary Accounting Research 11 (2): 733–747.

Bukhvalov A. V. (ed.) 2012. Corporate Governance: Issues of Practice and Valuation of Russian Companies. GSOM: St Petersburg. [In Russian]

Bukhvalov A. V., Akulaeva E. A. 2014. Empirical fundamental valuation of Russian companies: Searching for strategic Value. Russian Management Journal 12 (2): 3–12. [In Russian]

Bukhvalov A. V., Volkov D. L. 2005. Study on interrelation between fundamental value and market capitalization of Russian companies. Vestnik of Saint Petersburg University. Management (1): 26–43. [In Russian]

Burgstahler D. C., Dichev I. D. 1997. Earnings, adaptation value and equity value. The Accounting Review 72 (2): 187–215.

Chow G. C. 1960. Tests of equality between sets of coefficients in two linear regressions. Econometrica 28 (3): 591–605.

Ciftci M., Darrough M., Mashruwala R. 2014. Value relevance of accounting information for intangible-intensive industries and the impact of scale: The US evidence. European Accounting Review 23 (2): 199–226.

Collins D. W., Pincus M., Xie H. 1999. Equity valuation and negative earnings: The role of book value of equity. The Accounting Review 74 (1): 29–61.

Dechow P. M., Hutton A. P., Sloan R. G. 1999. An empirical assessment of the residual income valuation model. Journal of Accounting and Economics 26 (1–3): 1–34.

El-Gazzar S. M., Finn P. M., Tang C. 2009. The value relevance of earnings and nonearnings information in regulated and deregulated markets: The case of the airline industry. International Advances in Economic Research 15 (1): 88–101.

Feltham G. A., Ohlson J. A. 1995. Valuation and clean surplus accounting for operating and financial activities. Contemporary Accounting Research 11 (2): 689–731.

Grant R. 2010. Shareholder value maximization: Rehabilitating a “dumb idea”. Competitive Strategy Newsletter 4 (1): 9–11.

Gregory A., Saleh W, Tucker J. 2005. A UK test of an inﬂation-adjusted Ohlson Model. Journal of Business Finance and Accounting 32 (3–4): 487–534.

Herath H. S. B., Richardson A. W., Roubi R. R., Tippett M. 2015. Non-linear equity valuation: an empirical analysis. Abacus 51 (1): 86–115.

Holthausen R. W., Watts R. L. 2001. The relevance of the value-relevance literature for financial accounting standard setting. Journal of Accounting and Economics 31 (1–3): 3–75.

Morel M. 2003. Endogenous parameter time series estimation of the Ohlson model: Linear and non-linear analysis. Journal of Business Finance and Accounting 30 (9–10): 1341–1362.

Myers J. N. 1999. Implementing residual income valuation with linear information dynamics. Accounting Review 74 (1): 1–28.

Ohlson J. A. 1995. Earnings, book values, and dividends in security valuation. Contemporary Accounting Research 11 (2): 661–687.

Rogova E., Luzina D. 2015. The effect of mergers and acquisitions on companies’ fundamental values at BRICS countries. Journal of Corporate Finance Research 35 (3): 27–50. [In Russian]

Siegel J. J. 1998. Stocks for the Long Run. The Definitive Guide to Financial Market Returns and Long-Term Investment Strategies. McGraw-Hill: N.Y.

Siegel J. J. 2013. Stocks for the Long Run. McGraw-Hill: N.Y.

Sohn B. C. 2012. Equity value, implied cost of equity and shareholders' real options. Accounting and Finance 52 (2): 519–541.

Volkov D. L., Berezinets I. V. 2006. Value-based management: Validity problem of accounting-based valuation models. Vestnik of Saint Petersburg University. Management (4): 3–32. [In Russian]

Zhang G. 2000. Accounting information, capital investment decisions, and equity valuation: Theory and empirical implications. Journal of Accounting Research 38 (2): 271–295.