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Comparability And Cost Of Equity Capital
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Book Synopsis Comparability and Cost of Equity Capital by : Michael Imhof
Download or read book Comparability and Cost of Equity Capital written by Michael Imhof and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate how the comparability of a company's financial statements is related to its cost of equity capital. Financial Accounting Standards Board's (FASB) Concept Statement No. 8 proposes that comparability is a key tenet of accounting because it allows users of financial statements to benchmark a firm against similar firms when distinguishing between alternative investment opportunities. We provide evidence that greater financial statement comparability is associated with lower cost of equity capital, and show that comparability's effect on cost of equity remains after controlling for within-firm accounting quality. Additionally, we find that investors derive greater benefits from financial statement comparability in firms whose information environments are less transparent (high information asymmetry) and whose equity shares trade in markets that are less competitive (imperfect markets). Our findings contribute to accounting research by providing evidence justifying comparability as a separate element of the FASB's conceptual framework.
Book Synopsis Estimating beta and Cost of Equity Capital for Non-traded Transportation Companies by : Sascha Heller
Download or read book Estimating beta and Cost of Equity Capital for Non-traded Transportation Companies written by Sascha Heller and published by diplom.de. This book was released on 2014-04-11 with total page 71 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inhaltsangabe:Introduction: Estimating the cost of equity capital has two major implications. First, it reflects the return to a company s stock which an equity investor expects to receive from his investment. He makes his decision upon whether he could earn a higher rate of return in an alternative investment of equivalent risk. Second, a company must earn the cost of capital (both debt and equity) through its undertaken projects. It is hence relevant for decisions on undertaking positive net present value projects which are of similar risk as the company s average business activities. It also substantially influences the pricing of an entire firm as far as the valuation is based on a discounted cash flow model. A lot of effort has been done in the past to achieve accurate models which precisely determine this cost. Building on the modern portfolio theory of Harry Markowitz, a widely used and commonly known model in this context is the Capital Asset Pricing Model (CAPM). Introduced by several researchers in the 1960s, it is still one of the most applied methods for practitioners. However, it suffers from several shortcomings, including statistical caveats, economic assumptions, the absence of market frictions and the behaviour of market participants. An upgrade to this model was provided by Stephen Ross which has resulted in the Arbitrage Pricing Theory (APT). It combines several risk factors in addition to one market proxy, as it is the case in the CAPM, and is less restrictive in its assumptions. But both CAPM and APT require observable market data, i.e. stock prices, of the analysed companies. These models thus only work for publicly listed firms. If research should be done on non-traded companies, however, an alternative methodology must be applied. In general, data from the balance sheet, the income statement and the cash flow statement are available for both listed and non-listed companies. While accounting data have widely been used in the past as well and have been assumed to provide valuable information in explaining stock returns, this line of research has dissipated over time. Only a few key figures, such as size and financial leverage, are still considered to be relevant. However, they can be used to indirectly estimate a firm s beta by assessing their explanatory power in a CAPM or APT framework. This methodology is particularly beneficial for firms which are not listed because there cannot be observed any stock price movements. [...]
Book Synopsis The Cost of Equity Capital by : William R. Purvis
Download or read book The Cost of Equity Capital written by William R. Purvis and published by . This book was released on 1973 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Effect of Exchange-listing on a Firm's Cost of Equity Capital by : Dan S. Dhaliwal
Download or read book The Effect of Exchange-listing on a Firm's Cost of Equity Capital written by Dan S. Dhaliwal and published by . This book was released on 1980 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Banking Industry Guide: Key Insights for Investment Professionals by : Ryan C. Fuhrmann
Download or read book The Banking Industry Guide: Key Insights for Investment Professionals written by Ryan C. Fuhrmann and published by CFA Institute. This book was released on 2017 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Cross-border Valuation by : Gordon M. Bodnar
Download or read book Cross-border Valuation written by Gordon M. Bodnar and published by . This book was released on 2003 with total page 74 pages. Available in PDF, EPUB and Kindle. Book excerpt: "How does a firm in one country evaluate an investment in a firm in another country, or how does it evaluate a foreign project that the firm itself is undertaking? The firm must estimate future free cash flows just as in a domestic project, but choosing an appropriate discount rate is a particular challenge. This study examines the determinants of the discount rate for an international acquisition or project by examining the sources of risk in an international setting. These risks include stock-market price risk measured with various versions of the capital asset pricing model, as well as exchange rate risk and political risk. To measure stock market risk, both segmented and integrated models of the world equity markets are considered. The emphasis of the study is on some of the practical aspects of estimation, particular for markets where no comparable investments exist on which to base estimates of risk premiums. To show how each of these risks might be measured, the study reports estimates for a representative French firm, Thals. The estimates range widely depending on whether or not the equity market is globally integrated"--NBER website
Book Synopsis Estimating the Cost of Equity Capital for a Division of a Firm by :
Download or read book Estimating the Cost of Equity Capital for a Division of a Firm written by and published by . This book was released on 1989 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Impact of Improved Financial Disclosure on the Cost of Equity Capital by : Dan Singh Dhaliwal
Download or read book The Impact of Improved Financial Disclosure on the Cost of Equity Capital written by Dan Singh Dhaliwal and published by . This book was released on 1980 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Costs of Equity Capital and Model Mispricing by : Lubos̆ Pástor
Download or read book Costs of Equity Capital and Model Mispricing written by Lubos̆ Pástor and published by . This book was released on 1998 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: Costs of equity for individual firms are estimated in a Bayesian framework using several factor-based pricing models. Substantial prior uncertainty about mispricing often produces an estimated cost of equity close to that obtained with mispricing precluded, even for a stock whose average return departs significantly from the pricing model's prediction. Uncertainty about which pricing model to use is less important, on average, than within-model parameter uncertainty. In the absence of mispricing uncertainty, uncertainty about factor premiums is generally the largest source of overall uncertainty about a firm's cost of equity, although uncertainty about betas is nearly as important
Book Synopsis Illiquidity and the Cost of Equity Capital by : Amit Goyal
Download or read book Illiquidity and the Cost of Equity Capital written by Amit Goyal and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Valuation of Common Stock and the Cost of Equity Capital by : John Gregory McDonald
Download or read book Valuation of Common Stock and the Cost of Equity Capital written by John Gregory McDonald and published by . This book was released on 1967 with total page 208 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Estimating the Cost of Equity Capital Using Time Series Analysis by : Howard Elliott Thompson
Download or read book Estimating the Cost of Equity Capital Using Time Series Analysis written by Howard Elliott Thompson and published by . This book was released on 1983 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Cross-Border Valuation by : Gordon M. Bodnar
Download or read book Cross-Border Valuation written by Gordon M. Bodnar and published by . This book was released on 2010 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: How does a firm in one country evaluate an investment in a firm in another country, or how does it evaluate a foreign project that the firm itself is undertaking? The firm must estimate future free cash flows just as in a domestic project, but choosing an appropriate discount rate is a particular challenge. This study examines the determinants of the discount rate for an international acquisition or project by examining the sources of risk in an international setting. These risks include stock-market price risk measured with various versions of the capital asset pricing model, as well as exchange rate risk and political risk. To measure stock market risk, both segmented and integrated models of the world equity markets are considered. The emphasis of the study is on some of the practical aspects of estimation, particular for markets where no comparable investments exist on which to base estimates of risk premiums. To show how each of these risks might be measured, the study reports estimates for a representative French firm, Thals. The estimates range widely depending on whether or not the equity market is globally integrated.
Book Synopsis FCC Record by : United States. Federal Communications Commission
Download or read book FCC Record written by United States. Federal Communications Commission and published by . This book was released on 1994 with total page 410 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Accounting Standards and Their Effect on the Expected Cost of Equity Capital by : María T. Cabán-García
Download or read book Accounting Standards and Their Effect on the Expected Cost of Equity Capital written by María T. Cabán-García and published by . This book was released on 2006 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Implied Cost of Equity Capital of Family Firms by : Maximilian Vait Vollenbroich
Download or read book The Implied Cost of Equity Capital of Family Firms written by Maximilian Vait Vollenbroich and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Earnings Surprises and the Cost of Equity Capital by : Michael B. Mikhail
Download or read book Earnings Surprises and the Cost of Equity Capital written by Michael B. Mikhail and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Controlling for other determinants of the cost of capital, we find that firms with repeated large earnings surprises experience a higher cost of equity capital. This finding holds regardless of the sign of the earnings surprises, but firms that consistently report negative surprises have relatively higher cost of equity capital. Although firms that frequently surprise the market experience a decrease in analyst following relative to no surprise firms, this reduction in monitoring cannot account for the higher cost of equity capital. Overall, these findings document that repeated earnings surprises are costly, and provide evidence that managers have incentives to avoid missing earnings targets.
