Access the full text.
Sign up today, get DeepDyve free for 14 days.
Russell Lundholm, T. O'Keefe (2001)
Reconciling Value Estimates from the Discounted Cash Flow Model and the Residual Income ModelContemporary Accounting Research, 18
K. Im, Seung Ahn, P. Schmidt, J. Wooldridge (1999)
Efficient estimation of panel data models with strictly exogenous explanatory variablesJournal of Econometrics, 93
A. Rappaport (1986)
Creating shareholder value : the new standard for business performance
L. Jennergren (2008)
Continuing value in firm valuation by the discounted cash flow modelEur. J. Oper. Res., 185
H. Berkman, M. Bradbury, Jason Ferguson (2000)
The Accuracy of Price-Earnings and Discounted Cash Flow Methods of IPO Equity ValuationJournal of International Financial Management and Accounting, 11
Xavier Adserà, Pere Viñolas (2003)
FEVA: A Financial and Economic Approach to ValuationFinancial Analysts Journal, 59
N. Beneda (2003)
Estimating free cash flows and valuing a growth companyJournal of Asset Management, 4
S. Kaplan, Richard Ruback (1994)
The Valuation of Cash Flow Forecasts: An Empirical Analysis
Stephan Gross (2006)
Banks and Shareholder Value: An Overview of Bank Valuation and Empirical Evidence on Shareholder Value for Banks
Y. Yoo (2006)
The valuation accuracy of equity valuation using a combination of multiplesReview of Accounting and Finance, 5
H. Kyburg (1984)
Theory and measurement
James Ohlson (1995)
Earnings, Book Values, and Dividends in Equity Valuation*Contemporary Accounting Research, 11
J. Francis, Per Olsson, D. Oswald (2000)
Comparing the Accuracy and Explainability of Dividend, Free Cash Flow, and Abnormal Earnings Equity Value EstimatesJournal of Accounting Research, 38
E. Edwards, P. Bell (1962)
The Theory and Measurement of Business Income
Thomas Plenborg (2002)
Firm valuation: comparing the residual income and discounted cash flow approachesScandinavian Journal of Management, 18
K. YeeKenton (2004)
Combining Value Estimates to Increase AccuracyFinancial Analysts Journal, 60
V. Bernard (1995)
The Feltham-Ohlson Framework: Implications for Empiricists*Contemporary Accounting Research, 11
J. Gentry, F. Reilly, M. Sandretto (2003)
Learning about Intrinsic Valuation with the Help of an Integrated Valuation Model
Purpose – Being a developing nation with huge opportunity of growth prospects the assessment of valuation models becomes important to have a more realistic value estimate. The purpose of this paper is to empirically examine the comparative accuracy and explanatory performance of discounted cash flow (DCF) and residual income model (RIM) valuation models for the Indian chemical industry and come up with a composite valuation model. Design/methodology/approach – To achieve the objective of the study the authors first determine the intrinsic values using both the models. Comparisons of the models are based on prediction errors and the explanatory performance of market value on value estimates. The study uses panel regression to forecast estimates of earnings and measure explanatory performance. The authors examine the ability of the value estimates to explain cross-sectional variation in the observed market values. The study also uses GMM method for deriving robust estimators. Variables for the study are collected from the CMIE’s prowess data base (release 4). The authors consider all 1,075 BSE listed chemical companies for the purpose of the study. The study uses annual data points starting from 31 March 2002 to 31 March 2011. Findings – The comparative framework shows that both Residual Income model and Composite Valuation model are superior to Discounted cash flow model and are equally likely. But since composite value estimates considers all bonafide informations of individual models, the estimates of Composite Valuation model becomes more reliable. Research limitations/implications – The study only compares and combines the two most widely used valuation models around the world. Future studies can be conducted using the third widely used valuation models, i.e. multiples and see the level of accuracy of individuals as well as the composite model. Originality/value – As a concern very few research has been conducted in this area in India. This paper provides practitioners with a snapshot of the applicability of DCF and RIM valuation models. And also shows how a composite value estimate can improve accuracy.
Journal of Accounting in Emerging Economies – Emerald Publishing
Published: May 1, 2015
Read and print from thousands of top scholarly journals.
Already have an account? Log in
Bookmark this article. You can see your Bookmarks on your DeepDyve Library.
To save an article, log in first, or sign up for a DeepDyve account if you don’t already have one.
Copy and paste the desired citation format or use the link below to download a file formatted for EndNote
Access the full text.
Sign up today, get DeepDyve free for 14 days.
All DeepDyve websites use cookies to improve your online experience. They were placed on your computer when you launched this website. You can change your cookie settings through your browser.