This paper develops a theoretical model to explain corporate divestment in the context of accounting-based valuation and provides empirical evidence to support the model's predictions. Building on Zhang's (2000) real-options-based equity value model, we develop a model to explain why firms with...

This paper provides theory and evidence showing how accounting variables explain cross-sectional stock returns. Based on Zhang (2000), who relates equity value to accounting measures of underlying operations, we derive returns as a function of earnings yield, equity capital investment, and...

This paper develops the geometric representation of an equity valuation model to illustrate how equity value relates simultaneously to profitability, earnings, and equity book value, and empirically tests those relations. We depict Zhang's (2000) model as a quot;surfacequot; in the...

This paper provides theory and evidence showing how accounting variables explain cross-sectional stock returns. Based on Zhang (2000), who relates equity value to accounting measures of underlying operations, we derive returns as a function of earnings yield, equity capital investment, and...

This paper develops a theoretical model to explain corporate divestment in the context of accounting-based valuation and provides empirical evidence to support the model's predictions. Building on Zhang's (2000) real-options-based equity value model, we develop a model to explain why firms with...

Applying a real-options based valuation approach, we develop and test a model that addresses the incremental value relevance of segment data beyond firm-level accounting data. Prior studies (e.g., Zhang 2000; Biddle, Chen and Zhang 2001) show that equity valuation requires accounting data (in part)...

Both private information production by market traders and public disclosure by firms contribute to dissemination of financial information in the capital market. However, the motives and economic consequences of the two are quite different. In general, private information production is intended...

This paper combines the framework of Feltham/Ohlson (1996) with endogenous investment decisions to re-examine the role of book value and earnings for valuation. The paper recognizes that current accounting data contains information useful for guiding operating decisions, and operating activity...

Economic reasoning suggests that capital follows profitability. This study introduces into residual income valuation quot;capital follows profitabilityquot; investment dynamics whereby capital investments are guided by the profitability of underlying investment opportunities. These investment...

Employing a real options based valuation model, this paper examines the valuation roles of earnings and book value and cross-sectional differences in valuation properties. Consistent with theoretical predictions, we find that (i) as profitability increases, the value impact of earnings increases...