FIRM’S LIFE CYCLE AND OHLSON VALUATION MODEL: EVIDENCE FROM IRAN
Journal Title: Asian Economic and Financial Review - Year 2015, Vol 5, Issue 4
Abstract
Ohlson prediction and valuation models Ohlson (1995) are based on firm book value, accounting profit and the assumption of "randomized, balanced and stabilized abnormal earnings". On the other hand, the significance of risk and performance indicators during the firm?s life cycle is different according to the life cycle theory. This literature represents the linkage of these indicators with the firm?s value in different life cycle stages. In this study which is aimed to review the ability to improve the Ohlson valuation model considering the firm?s life cycle variable, a sample of 110 firms listed in Tehran Stock Exchange between 2003 and 2013 was selected. Using Anthony and Ramesh (1992) variables and Park and Chen (2006) methodology, the life cycle was divided into three stages and then, considering the firm?s place in the life cycle, prediction models of abnormal earnings and Ohlson firm?s valuation Ohlson (1995) were adjusted and afterward the adjusted models were compared with the initial model in two short-term and long-term estimation periods of 5 and 10 years, respectively. The results show that during both estimation periods, the adjusted model has a better performance in predicting abnormal earnings and firm?s valuation compared to the initial model. During the 10-year estimation period, the two models? estimated values were significantly less than actual values. The probable reason for this difference is the sharp rise in the value of stocks during the final years of the period especially between 2012 and 2013.
Authors and Affiliations
Hossein Etemadi| Department of Accounting, Tarbiat Modares University, Iran, Forough Rahimi Mougouie*| Tarbiat Modares University, Iran
Keywords
Related Articles
- EP ID EP2192
- DOI -
- Views 388
- Downloads 37
THE EFFECT OF MACROECONOMIC & MARKET SPECIFIC DYNAMICS ON STOCK MARKET DEVELOPMENT IN GLOBAL GROWTH GENERATOR COUNTRIES
As the global financial crisis dethrones the developed world from its economic supremacy, by leading the global economic recovery and growth, the global growth generator (3G) countries are expected to fill the vacuum. Ca...
PROSPECT OF E-BANKING IN BANGLADESH: NEW WAY TO MAKE BANKING ELECTRONIC
Being a developing country E-banking opened up tremendous opportunity to the financial sector and economic development of Bangladesh. This paper studies prospects of e-banking in Bangladesh, considering the performance o...
THE EFFECT OF ECONOMIC FACTORS ON MENTAL DISORDER RESULTING TO CRIME
Nowadays, social criteria such as economic situation, educational degree, and marital status and so on play a significant role in individual development and growth in community. Lack of such parameters provides backgroun...
SUGGESTION OF ISLAMIC INSURANCE COMPANY MODEL
This study is one of very few studies which have investigated Islamic Insurance Companies as solution. It explained its operations also comparing with Traditional Insurance Companies and theoretical Islamic insurance mod...
CORPORATE BOARD DIVERSITY AND FINANCIAL PERFORMANCE OF INSURANCE COMPANIES IN NIGERIA: AN APPLICATION OF PANEL DATA APPROACH
The major objective of this study is to investigate the relationship between board diversity and financial performance of insurance companies in Nigeria, with specific reference to how gender diversity, ethnic diversity,...