A Theory of Accounting Relativity: Double-Entry Bookkeeping as a Transformation of Coordinates
Aoyama Business School
January 8, 2007
The dividend discount model is a special case of the residual income model and the fundamental value of the firm is a scalar invariant under any accounting system with the clean-surplus. Under double-entry bookkeeping, any accounting system is relative concerning valuation in the sense that the fundamental value is a scalar invariant. A dividends stream or any accounting sequence has no a priori conceptual as well as empirical grounds to claim its primacy over others in valuation.
Number of Pages in PDF File: 14
Keywords: Accounting Relativity, Dividend Discount Model, Invariance, Residual Income, Valuation
JEL Classification: G12, M41working papers series
Date posted: January 16, 2007
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