Valuation and Growth Rates Manipulation

42 Pages Posted: 8 Oct 2008

See all articles by Arieh Gavious

Arieh Gavious

Ono Academic College; Ben-Gurion University

Joshua Ronen

New York University (NYU) - Department of Accounting

Varda Lewinstein Yaari

Multiple version iconThere are 3 versions of this paper

Date Written: June 2002


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.

Keywords: Valuation, moral hazard, growth rates, smoothing

Suggested Citation

Gavious, Arieh and Ronen, Joshua and Yaari, Varda Lewinstein, Valuation and Growth Rates Manipulation (June 2002). NYU Working Paper No. JOSHUA RONEN-06. Available at SSRN:

Arieh Gavious (Contact Author)

Ono Academic College ( email )

Kyriat Ono

Ben-Gurion University ( email )

Beer-Sheva 84105

Joshua Ronen

New York University (NYU) - Department of Accounting ( email )

40 West 4th Street, Suite 400
Suite 10-180
New York, NY 10012-1118
United States
212-998-4144 (Phone)
212-995-4599 (Fax)


No contact information is available for Varda Lewinstein Yaari

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