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We use the Gordon (Rev Econ Stat 41(2):99-105, 1959) constant growth model to gauge the effects from innovations in implied growth versus discount rates. During the COVID-19 downturn and the Global Financial Crisis (GFC), stock returns were largely affected by a change in the long-run implied growth rate and only to a lesser extent by a change in discount rate, the latter typically used to explain stock returns in the classical asset pricing literature. We reach this conclusion by using ordinary least-squares (OLS) regressions of stock returns on the unobservable Gordon factors, which we estimate from firm-level valuation ratios D/P, P/E, and P/B. The effects from a decrease in implied growth outweigh those from an increase in discount rate by a factor of approximately 1.6 to 1.7. Also, firms with a decrease in implied growth show a stock return that is approximately 6.6% more negative than that of firms with no decrease in implied growth. Investors can infer valuable information from the joint interpretation of underlying market fundamentals as derived from the Gordon model.

We use the Gordon (1959) constant growth model to gauge the effects from innovations in implied growth versus discount rates. During the COVID-19 downturn and the Global Financial Crisis (GFC), stock returns were largely affected by a change in the long-run implied growth rate and only to a lesser extent by a change in discount rate, the latter typically used to explain stock returns in the classical asset pricing literature. We reach this conclusion by using ordinary least squares (OLS) regressions of stock returns on the unobservable Gordon factors, which we estimate from firm level valuation ratios D/P, P/E and P/B. The effects from a decrease in implied growth outweigh those from an increase in discount rate by a factor of approximately 1.6 to 1.7. Also, firms with a decrease in implied growth show a stock return that is approximately 6.6% more negative than that of firms with no decrease in implied growth. Investors can infer valuable information from the joint interpretation of underlying market fundamentals as derived from the Gordon model.

Under flera år har forskare kunnat hittat stöd för en stark initial avkastning när ett företag noteras på en börslista för första gången. Samtidigt tenderar dessa bolag att underprestera marknaden och liknande noterade bolag på längre sikt. Flera mönster har också identifierats gällande i vilka perioder där noteringsaktiviteten varit som störst. Examensarbetet syftar till att utvärdera om det råder något samband mellan värderingen som föreligger på börsen och antalet bolag som noteras. I examensarbetet ska vi även analysera om det finns en skillnad i avkastning på kort och lång sikt för noteringarna beroende på vilken värdering som varit på börsen när bolaget har noterats. Genom att använda data för de börsnoteringar som har noterats under 2007 till 2021 samt börsens värdering under samma tidsperiod genomförs en regressionsanalys. Vidare delas börsnoteringarna in i två grupper, där gruppen låg värdering innehåller börsnoteringar som noterades när börsen värderades under medelvärdet för undersökningsperioden. Gruppen hög värdering inkluderade börsnoteringarna som noterades då börsen värderades över medelvärdet. Skillnaden i kursutveckling för börsnoteringarna i de två olika grupperna utvärderas sedan med ett T-test. Studien gav stöd för att det finns ett laggat samband med antalet noteringar som sker och värderingen som finns på aktiemarknaden. Studien kunde däremot inte dra några slutsatser om det finns några skillnader i den avkastningen som genererats av noteringarna baserat på värderingen på börsen vid introduktionstillfället. Researchers have for years documented an initial return for companies listing their stock on a public exchange for the first time. However, there is also a tendency for these firms to underperform compared to the general market and similarly sized firms in the long run. Patterns have also been identified regarding which periods have the strongest activity among IPOs. This thesis tries to evaluate if a relationship exists between the number of IPOs and the valuation of the stock market. Further, the thesis also tests if there is a difference in the performance of the IPOs in both the short run and the long run based on the valuations in the stock market during their market entry. Using data over the IPOs between 2007-2021 and the stock market valuation for the same period, a regression analysis is then run. Further the IPOs are divided into two groups, where the group low valuation includes IPOs that were offered when the stock market valuation was lower than the mean valuation of the time period. The group high valuation included IPOs that were offered when the stock market valuation was higher than the mean valuation. Differences between the groups in the IPOs stock performance are then evaluated with a t-test. The results from the study showed evidence of a strong lagged relationship between the number of IPOs and the stock market valuation. However, the results did not support the existence of differences of performance based on the valuations of the stock market at the time of their entry.

Using a large sample of African firms over the period 1982—2015, we find that firms forced into financial conservatism due to financial constraints have lower stock market valuation and profitability relative to their unconstrained counterparts who choose conservatism (optional financial conservatism) for motives linked to financial flexibility. Our further analyses, however, show a decrease in investments and employment with financial conservatism in the long-run. This finding highlights a significant trade-off with the desire to attain or enhance financial flexibility. Overall, our study confirms the benefits of optional financial conservatism and detriments of forced financial conservatism in developing markets where access to finance is limited.

Corporate diversification is one of the most debated topics in finance over the past two decades. While it is widely believed that there exists a discount in the stock market valuation of conglomerate firms, the extant research based on least squares methods points to different directions. We argue that the existing empirical analyses ignore some important data features, especially cross sectional heterogeneity, predicted by both theories and casual observations on corporate diversification, and thus cannot provide a complete picture of the diversification discount. Using a quantile regression analysis on U.S. public firms, we investigate the importance of heterogeneity of diversification as well as other firm characteristics. Estimated quantile treatment effects exhibit substantial heterogeneity as predicted. Thus mean impacts miss a great deal. We also tie back differences in the effect of diversification in high-valued and low-valued firms to observable agency characteristics; the most interesting finding is that CEOs seem to play vastly different roles in high-valued and low-valued firms. We conclude that the effect of diversification is likely more varied and more extensive than has been recognized.

In this paper, we investigate the stock market valuation of the intangible asset created by selling, general, and administrative (SG&A) expenditure. Although GAAP requires immediate expensing of SG&A, prior studies show that current SG&A generates future economic benefits, suggesting that it creates an intangible asset. We find that the contemporaneous stock market seems to recognize some of the intangible asset value implicit in SG&A. Positive subsequent returns can be earned in firms with a high SG&A intangible asset value. These excess returns are more likely due to investor mispricing than to risk compensation. Furthermore, we find that both analysts' long-term growth forecast revisions and one-year-ahead forecast errors are positively associated with the future value created by current SG&A, indicating that analysts partially incorporate the intangible SG&A asset value into their forecasts. Overall, the evidence suggests that the capital market only partially recognizes the intangible asset value created by SG&A expenditure.

This paper shows that the Warren Buffet Indicator (BI) about stock market valuation, measured as the overall stock market value divided by GDP, contains an upward bias and not a proper indicator for three main reasons. Primarily, over 40% of the SP both reasons shifts the balance between public vs private companies. For example, the Uber IPO add new business (transportation) to the stock market cap; was not before. Another example, if Apple the largest company decided to be private, then the Buffet Indicator will show that the market is undervalue. Thus, the BI turn to be a trend and since 2013, the BI is higher than the 2000 valuation. Possibly, the BI measures the fraction of the US GDP produced public companies. Instead, we offer the Bonaparte Valuation Indicator (BVI), which is measured as the current price earnings ratio divided by the forward GDP. It is imperative the forward looking to be included, since stock market is several quarters ahead. Altogether, despite the simplicity of the Buffet Indicator, it is no longer can play a role of this dynamic financial market, instead we offer the Bonaparte Indicator that accounts for earnings with forward looking.

This study attempts to contribute to the research literature in the field of management of earnings results and how it is put into practice by Moroccan listed companies. The main question that the paper attempted to investigate is whether these companies' managers use accounting results management in an opportunistic way. The study was conducted on a sample of 54 companies on the Casablanca Stock Exchange between 2014 and 2016.The findings indicate that the guarantee of a stock market valuation to influence investors' decisions is not at the heart of results management in Moroccan listed companies. Nevertheless, the importance of the size factor and the satisfaction of the conditions imposed by the creditors to justify the level of the discretionary behavior of the managers in terms of accounting and financial information are noteworthy. Baghar Nezha "Earnings Management, the Influence of Size, Indebtedness and Performance: The Case of Moroccan Listed Companies" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-3 | Issue-2 , February 2019, URL: https://www.ijtsrd.com/papers/ijtsrd21387.pdf

We examine whether firms’ information environment influences the market valuation of their hard‐to‐value knowledge assets: R&D capital. We find that a better information environment, as measured by greater analyst coverage, lower earnings forecast dispersion, and greater earnings forecasting accuracy, is associated with higher stock market valuation of firms’ R&D capital. We conduct additional analyses to rule out alternative explanations and test for the direction of causality. Our causal evidence suggests that analysts significantly reduce the information uncertainty surrounding firms’ R&D capital.

In a cross-border takeover, the tax base associated with future capital gains is transferred from target shareholders to acquirer shareholders. Cross-country differences in capital gains tax rates enable us to estimate the discount in target valuation on account of future capital gains. We estimate that a 1 percentage point increase in the capital gains tax rate reduces the value of equity by around 0.3%, which suggests that the capital gains tax significantly raises firms’ cost of capital. Furthermore, we find that the implied capital gains tax burden is higher at times of high economic growth and low stock market valuation.

This study investigates how both the amount of information provided in and the timing of new product preannouncements (NPPAs) influence firm value over the NPPA period, the new product introduction (NPI) period and in the long term, respectively. We adopt an information economics perspective, and signalling theory in particular, to motivate our tests. The findings show that the share price impact of the product information content varies over the different time horizons assessed. It is positive within the NPPA period and in the long term, but insignificant within the NPI period. The use of an early NPPA is associated with a negative impact on firm value across the NPPA, NPI and long-term horizons. We also test for moderating effects and show that earlier timing weakens the positive impacts of information amount on firm value both within the NPPA period and the long-term horizon.

Even though commercial banks have gradually followed the diversification strategy and deeply penetrated into non-traditional businesses for further income sources, studies on potential diversification benefits provide mixed results. This paper investigates how stock market values bank diversification using a data set of Vietnamese listed banks for the period 2006–2014. Overall, we find a negative relationship between bank diversification and stock market valuation. This implies investor preference for banks focusing on traditional activities.

Improving the energy efficiency of retail stores has become an important strategy for retailers. However, why do some retailers obtain Energy Star certification for their stores while others do not? We argue that retailers pursue this certification to capture reputational benefits of the Energy Star label when their stock market valuation is low. Using longitudinal data for US retailers (grocery and department stores) over the period of 2002 to 2014, we find that stock market valuation measured by Tobin’s Q explains (1) the likelihood of a retailer obtaining Energy Star certification and (2) the share of Energy Star-certified stores in a retailer’s portfolio. Operating expenses on the other hand do not appear to drive the decision to obtain Energy Star certification. Our results also suggest that the motivations of retailers to obtain LEED and Energy Star certification differ.

Using firm-level data on listed non-financial companies in 14 advanced economies, we document a rise in the share of zombie firms, defined as unprofitable firms with low stock market valuation, from 4% in the late 1980s to 15% in 2017. These zombie firms are smaller, less productive, more leveraged and invest less in physical and intangible capital. Their performance deteriorates several years before zombification and remains significantly poorer than that of non-zombie firms in subsequent years. Over time, some 25% of zombie companies exited the market, while 60% exited from zombie status. However, recovered zombies underperform compared to firms that have never been zombies and they face a high probability of relapsing into zombie status.

The paper examines the relationship between stock market valuation and output growth at the firm level. Specifically, it aims at understanding the impact of firms’ stock market valuation and stock liquidity on the growth of real output. The sample for the study includes panel data of Indian public limited manufacturing firms. The study covers the period from March 2004 to March 2017. Firms with at least two consecutive years of data have been included in the sample. The full sample includes firm-year observations of 877 firms. The finding shows that both stock market valuation and turnover ratio have a significant positive impact on the growth of output, even after controlling for other important determinants of output. Further, both stock market variables and bank credit significantly influence the growth of output. This suggests that banks and stock market provide complementary financial services required for the growth and the development of the stock market will not undermine the role of the institution based financial system.

The purpose of this paper is to assess whether a relation exists between stock market valuation and the extent to which Italian listed companies disclose information on their digitalization initiatives. The authors posit that the disclosure of digitalization-related information is a form of intellectual capital disclosure, which provides potentially value-relevant information to investors. Additionally, it is assumed that the reputation for corporate sustainability affects the relation between digitalization disclosure and stock market valuation. To test the aforementioned hypotheses, the authors first quantified the extent of digitalization disclosure by content-analysing the annual reports of 75 Italian listed companies for the years 2011–2017, and then they examined the value relevance of digitalization-related information accounting for the role of corporate sustainability. Empirical results suggest 1) that stock market participants incorporate digitalization-related information into their business valuation process, and 2) that firms with better reputation for corporate sustainability achieve higher valuations from disclosing their digitalization efforts. The potential contribution of this study is manifold: first, it extends prior research on the value relevance of IC disclosure by broadening its scope to include digitalization-related disclosure and evidencing the (moderating) role of corporate sustainability in firm valuation; second, it provides some empirical substance to the discussion on how to measure the value a company extracts from digitalization efforts; and third, it may support the case for increased non-financial disclosure as called for by accounting regulators and standard setters.

This study aimed to examine stock price reactions to announcements of Leadership in Energy and Environmental Design (LEED)-certified hotel openings. Using an event study method, the authors analyze news related to 15 hotel openings between the periods of 2009 and 2013. The results show that abnormal returns on stocks are significantly negative after the announcements of LEED-certified hotel openings, suggesting that stock market investors perceive sustainable investments to be value-decreasing projects in the short-term. Practical and theoretical implications are discussed within the framework of the microeconomic theory of pollution abatement.

This article discusses and proposes a consistent, fundamental approach to help investors summarize the salient characteristics of a company and relate them to stock market valuation.

The paper studies the volatility and correlation pattern of the fundamental valuation parameters (growth rate and its determinants, discount rate) calculated from widely used valuation ratios using the Gordon formula and relate them to some well-known results from the asset pricing literature. Our results reveal a substantially different picture of the volatility and cyclicality of the implied valuation parameters compared to estimates from econometric models using historical returns. We argue, in the spirit of Campbell (2008), that implied Gordon parameters can be interpreted as empirical proxies for conditional steady-state market fundamentals, which is supported by our findings.

The thesis focuses on the impact of stock market valuation on the performance of M&A. Listed companies from Shanghai and Shenzhen Stock Exchange M&A events between 2012 and 2014 are chosen as the study sample, the stock market valuation is measured by average PE monthly, and the performance of M&A is calculated by financial data. Through the analysis, the following conclusion is drawn: in the over-valuation period, there are more M&A events. And the performance will be worse when M&A events occur in the over-valuation period. On the basis of the conclusion, the author put forward some suggestions to listed companies.

The thesis focuses on the impact of stock market valuation on the performance of M&A. Listed companies from Shanghai and Shenzhen Stock Exchange M&A events between 2012 and 2014 are chosen as the study sample, the stock market valuation is measured by average PE monthly, and the performance of M&A is calculated by financial data. Through the analysis, the following conclusion is drawn: in the over-valuation period, there are more M&A events. And the performance will be worse when M&A events occur in the over-valuation period. On the basis of the conclusion, the author put forward some suggestions to listed companies.