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| Author: | Chen, F. Jorgensen, B.N. Yoo, Y.K. |
| Title: | Implied cost of equity capital in earnings-based valuation: international evidence |
| Journal: | Accounting and Business Research
2004 : VOL. 34:4, p. 323-344 |
| Index terms: | Earnings per share Equity capital Residual income |
| Freeterms: | Implied cost |
| Language: | eng |
| Abstract: | Assuming the clean surplus relation, the Edwards-Ohlson residual income valuation (RIV) model expresses market value of equity as the sum of the book value of equity and the expected discount future residual incomes. Without assuming the clean surplus reaction, Ohlson and Juettner-Nauroth (2000) articulate the role of forward earnings per share in valuation. The implied of costs of equity capital is compared here from these two approaches to earnings-based valuation within seven developed countries. Superior performance is hypothesized from the RIV model is countries where the clean surplus relation holds well. |
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