When are Profitable Earnings Low Enough to Trigger a Liquidation Option?

Schnusenberg, Oliver

doi:10.2139/ssrn.237129

Abstract

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When are Profitable Earnings Low Enough to Trigger a Liquidation Option?

Oliver Schnusenberg

University of North Florida - Department of Accounting and Finance

July 21, 2000

Abstract:
The objective of this study is threefold. Our primary objective is to determine the point at which earnings become low enough to trigger a liquidation (abandonment) option during the 1998 fiscal year on the New York Stock Exchange and the Nasdaq. Second, we investigate whether that earnings level is intertemporally stable by investigating the valuation significance of earnings and book value during two pooled time periods from 1994 to 1998 and from 1989 to 1998. Third, we seek to determine whether the decreased valuation significance in earnings is associated with a simultaneous increase in the valuation significance of book value during all three time periods examined.

Key Words: Earnings; Book value of equity; Valuation; Abandonment option

Number of Pages in PDF File: 47

JEL Classification: G12, G13, M41

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Date posted: September 12, 2000

Suggested Citation

Schnusenberg, Oliver, When are Profitable Earnings Low Enough to Trigger a Liquidation Option? (July 21, 2000). Available at SSRN: http://ssrn.com/abstract=237129 or http://dx.doi.org/10.2139/ssrn.237129

Contact Information

Oliver Schnusenberg (Contact Author)

University of North Florida - Department of Accounting and Finance ( email )

College of Business Administration
4567 St. Johns Bluff Road, South
Jacksonville, FL 32224-2675
United States

HOME PAGE: http://www.unf.edu/~oschnuse