The empirical research in this thesis aims to better understand two complimentary components. First, whether there is a significant difference in the performance of accounting-based valuation models when examined across different industry types (i.e. cyclical or acyclical) and economic states (i.e. growth or recession). Second, how analysts use accounting-based valuation to justify investment recommendations and whether this changes across the samples aforementioned.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Literature review
- Distinction between equity and entity level valuation
- Multiples based valuation
- Accuracy of multiples
- Selecting comparables
- Choosing multiples
- Accounting flows based
- Dividend discount model
- Free cash flow model
- Residual income valuation model
- Derivation
- Benefits of the model
- Performance
- Implementation issues
- Abnormal earnings growth model
- Derivation
- AEGM versus the RIVM
- Valuation of defensive and cyclical firms
- Concluding remarks
- Large sample analysis
- Research question
- Sample selection
- Methodology
- Multiples based valuation
- Selected value driver
- Identification of comparable companies
- Estimation of value
- Accounting flows based valuation
- Cost of equity capital
- Dividend payout rate
- Forecasted earnings
- Forecast horizons and continuing value assumption
- Multiples based valuation
- Results and analysis
- Sample descriptive statistics
- Valuation errors
- Descriptive statistics of valuation errors
- Cross sample comparison of valuation errors
- Comparison of valuation errors within each sample
- Interaction between cyclicality and economic state
- Price explainability
- Sensitivity tests
- Multiples based valuation
- Flow based valuation
- CAPM assumptions
- Terminal value
- Concluding remarks
- Small sample analysis
- Research question and hypothesis development
- Target prices (Hypothesis 1)
- Earnings (Hypothesis 2)
- Flow models (Hypothesis 3)
- Investment recommendations (Hypothesis 4)
- Sample selection
- Results and analysis
- Industry characteristics
- Education services
- Tobacco manufacturers
- Food products manufacturing
- Health services
- Utilities
- Housing contractors
- Primary metal manufacturing
- Automobile manufacturing
- Airlines
- Paper manufacturing
- Tests of Empirical Hypothesis
- Target prices versus actual price (Hypothesis 1)
- Earnings as a value driver (Hypothesis 2)
- Use of flow based models (Hypothesis 3)
- Analyst investment ratings (Hypothesis 4)
- Industry characteristics
- Concluding remarks
- Research question and hypothesis development
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This dissertation examines the performance of accounting-based valuation models in different industry types (cyclical or defensive) and economic states (growth or recession). The research explores how analysts use accounting-based valuation to justify investment recommendations and whether this practice varies across different industry and economic conditions.- Performance of accounting-based valuation models in cyclical and defensive industries.
- Impact of economic growth and recession on valuation model effectiveness.
- Analyst use of accounting-based valuation for investment recommendations.
- Differences in analyst valuation practices across industry and economic environments.
- Comparison of earnings-based and accounting-flow models in valuation.
Zusammenfassung der Kapitel (Chapter Summaries)
- The introduction provides an overview of the research topic and its significance.
- The literature review examines existing research on equity valuation using accounting numbers, including the distinction between equity and entity level valuation, multiples-based valuation, accounting flows-based valuation, and the valuation of defensive and cyclical firms.
- The large sample analysis investigates the performance of various valuation models in different industry types and economic states using a large dataset. The analysis includes multiple-based valuation and accounting flows-based valuation.
- The small sample analysis explores how analysts use accounting-based valuation to justify investment recommendations in specific industries, examining target prices, earnings, flow models, and investment recommendations.
Schlüsselwörter (Keywords)
The central concepts explored in this dissertation are equity valuation, accounting-based valuation, cyclical and defensive industries, economic growth and recession, analyst investment recommendations, earnings-based models, and accounting-flow models.Frequently Asked Questions
What is the difference between equity-level and entity-level valuation?
Equity-level valuation focuses on the value of the company's shares for stockholders, while entity-level valuation determines the total value of the company, including debt and equity.
How do economic cycles affect accounting-based valuation models?
The effectiveness of models can vary significantly between growth and recession periods, as well as between cyclical industries (like automobiles) and defensive industries (like food products).
What is the Residual Income Valuation Model (RIVM)?
The RIVM is an accounting-based model that values a company based on its book value and the present value of its future expected residual income (earnings in excess of the required return).
How do financial analysts use valuation models for investment recommendations?
Analysts use models like multiples-based or flow-based valuation to justify target prices and ratings (buy/sell/hold) based on forecasted earnings and industry trends.
What are "multiples" in company valuation?
Multiples are ratios (like P/E ratio) used to value a company by comparing it to similar peer companies in the same industry.
- Quote paper
- Mark Brown (Author), 2012, Advanced Topics in Accounting, Munich, GRIN Verlag, https://www.grin.com/document/214886
