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 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)...

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...

Applying an option-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 et al. 2001) show that firm value relates to accounting data (in part) because accounting...