Abstract

http://ssrn.com/abstract=1280749
 
 

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Valuation and Growth Rates Manipulation


Arieh Gavious


Ono Academic College; Ben-Gurion University of the Negev - Department of Industrial Engineering and Management

Joshua Ronen


New York University (NYU) - Department of Accounting, Taxation & Business Law

Varda Yaari


Morgan State University - Department of Accounting and Finance

June 2002

NYU Working Paper No. 2451/27586

Abstract:     
Valuation requires the prediction of future growth rate of persistent earnings, whichdepend on past and present internal, unobservable, investment decisions. In this study, we investigate the â¬Smanagementâ¬? of the series of growth rates in a multi-period principal-agent model with a moral hazard problem between owners (the principal) and the manager (the agent). We find that the managerâ¬"s choice of efforts might yield a series of increasing expected growth rates, contrary to ownersâ¬" preferences. Consequently, the extrapolation ofexpected future earnings of an owner-controlled firm should differ from that of a management-controlled firm.

Number of Pages in PDF File: 42

Keywords: Valuation, moral hazard, growth rates, smoothing

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Date posted: October 8, 2008  

Suggested Citation

Gavious, Arieh and Ronen, Joshua and Yaari, Varda, Valuation and Growth Rates Manipulation (June 2002). NYU Working Paper No. JOSHUA RONEN-06. Available at SSRN: http://ssrn.com/abstract=1280749

Contact Information

Arieh Gavious (Contact Author)
Ono Academic College ( email )
Kyriat Ono
Israel
Ben-Gurion University of the Negev - Department of Industrial Engineering and Management ( email )
Beer-Sheva 84105
Israel
Joshua Ronen
New York University (NYU) - Department of Accounting, Taxation & Business Law ( email )
40 West 4th Street, Suite 400
New York, NY 10012-1118
United States
212-998-4144 (Phone)
212-995-4599 (Fax)
HOME PAGE: http://www.stern.nyu.edu/~jronen/
Varda Lewinstein Yaari
Morgan State University - Department of Accounting and Finance ( email )
School of Business and Management
1700 East Cold Spring Lane
Baltimore, MD 21251
United States
443-885-3445 (Phone)
301-654-4670 (Fax)
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