Discussion of Revalued Financial, Tangible, and Intangible Assets: Association with Share Prices and Non Market-Based Value Estimates

Abstract

The focus of this discussion is on the possible effects of scale in regressions that have price (or value) per share as the dependent variable. My argument rests on the fact that this dependent variable may reflect no more than the choice by management of the number of shares outstanding. Management may change the per share magnitude of firm attributes by means of stock-splits, stock dividends and/or reverse stock-splits without changing the economic characteristics of the firm. It follows that statistically significant coefficient estimates in regressions of share price on balance sheet data and income statement data may be of a spurious effect of scale.

JEL Classification: G12, M41, C51