This paper proposes an accounting for revenues as an alternative to the proposals currently begin aired by the FASB and IASB. Existing revenue recognition rules are vague, resulting in messy application, so the Boards are seeking a remedy. However, their proposals replace the traditional...

We empirically examine the profitability of leading Chinese firms, benchmarked against comparable US firms, for the period 2005-13. Return on invested capital (ROIC), which excludes leverage effects on performance, provides the primary metric. Averaged over firms and years, the two sets of firms...

Valuation techniques are important to practitioners and academics. Although theoretically equity value equals the present value of expected dividends, in practice, higher-level metrics such as free cash flows, earnings, and book values are used for valuation. This paper helps us understand these...

We generalize Ohlson's (1995) model to stochastic interest rates while making no specific assumptions about the stochastic process of interest rates. Our analysis of the case when earnings suffice for valuation yields three insights. (1) In the valuation function, the multiplier for forthcoming...

How should one conceptualize price-earnings multiples (earnings capitalization factors) when interest rates change stochastically? The paper shows that while the multiplier for forthcoming earnings depends on current rates, the multiplier for current earnings depends on lagged rates. With these...

We generalize Ohlson (1995) to stochastic interest rates. Our analysis provides four insights. First, the earnings capitalization multiple depends on the lagged rate, not the current rate. Second, the abnormal earnings persistence parameter increases in the current rate and decreases in the...

The paper develops a concept of transitory earnings and contrasts this source of earnings to quot;corequot; (or recurring) earnings. It is shown that any two of the following three attributes of transitory earnings imply the third: (i) forecasting irrelevance with respect to next-period...

This paper provides a general version of the accounting-based valuation model that equates the market value of a firm's equity to book value plus the present value of expected abnormal earnings. Prior theoretical work (e.g., Ohlson 1995; Feltham and Ohlson 1995, 1996) assumes investors are risk...

This paper concerns the terminal value calculation, represented by {numerator/(r-g)} where r and g define, respectively, the discount factor and the growth rate. Expressions of this kind derive from discounting a geometric series of payoffs, the Gordon-Williams model providing the prototype....

This paper develops an analytically coherent yet parsimonious framework which explains market returns in terms of contemporaneous information. It anchors on the idea that valuation (static perspective) can be connected to the dynamics that explains returns, and vice versa. The framework requires...