There are methods to match value added approaches (Residual Income Method, RIM and Economic Value Added, EVA) with discounted cash flow methods, DCF. In this note we use a real life case from an emerging country to illustrate the matching, with complexities such as unpaid taxes, losses carried...

Initial Gross Domestic Product (GDP) announcements are important economic signals that convey information on the state of the economy but contain substantial estimation error. We investigate how GDP estimation errors affect firms' real decisions and profitability. Consistent with theoretical...

I review 150 textbooks on corporate finance and valuation published between 1979 and 2009 by authors such as Brealey, Myers, Copeland, Damodaran, Merton, Ross, Bruner, Bodie, Penman, Arzac… and find that their recommendations regarding the equity premium range from 3% to 10%, and that 51 books...

This paper contains the statistics of a survey about the Risk-Free Rate (RF) and the Market Risk Premium (MRP) used in 2020 for 81 countries. We got answers for 87 countries, but we only report the results for 81 countries with more than 6 answers.Many respondents use for European countries a RF...

During decades, tests have been developed to verify whether the beta is the best tool to explain the returns of securities on the stock market. Moreover, the value of the beta and its coefficient of determination (R-squared) vary with different parameters used for estimating the beta. In this...

The duration and magnitude of the private economic benefits obtained from firm-level R&D outlays are important to managers, investors and policy-makers. We present a modeling and estimation approach that facilitates reliable estimation of these benefits under mild a priori assumptions. Our...

We evaluate the influence of measurement error in analysts' forecasts on the accuracy of implied cost of capital estimates from various implementations of the ‘implied cost of capital' approach, and develop corrections for the measurement error. We document predictable error in the implied...

In this paper, we illuminate the importance of accounting conservatism adjustments when estimating the implied cost of capital (ICC) with the Residual Income Valuation (RIV) and the Abnormal Earnings Growth (AEG) model. Specifically, we adjust for three main limitations in the research of ICC,...

We outline analytically that when testing different implied cost of capital (ICC) measures for validation by employing the Vuolteenaho (2002) framework, the cash-flow news in the validation framework should be defined in a way that considers the model specific assumed sequence of future cash...

What is the interaction between competition, R&D investments, and the financing choices of R&D-intensive firms? Motivated by existing theories, we hypothesize that as competition increases, R&D-intensive firms will: (1) increase R&D investment relative to assets-in-place that support existing...