Market Valuation and Deregulation of Electric Utilities

Journal of Accounting & Economics, Vol 29, No 2, April 2000

Posted: 18 Oct 2000

See all articles by Walter G. Blacconiere

Walter G. Blacconiere

Indiana University - Kelley School of Business - Department of Accounting

Marilyn F. Johnson

Michigan State University - Department of Accounting & Information Systems

Mark S. Johnson

University of Michigan at Dearborn

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Abstract

Recent studies have investigated the assertion that accounting information has become less value-relevant over time. This paper provides additional evidence on this issue by examining the effect of ongoing deregulation in the electric utility industry on the relation between market value, book value, and earnings. This setting allows us to use economic theory to make ex ante predictions about changes in the relation between accounting information and firm value. We predict that deregulation decreases (increases) the relative importance of book value (earnings) in explaining price. We test this prediction by examining changes in the value-relevance of book value and earnings during the 1988-1996 time period for a sample of large, investor-owned electric utilities. We find that the regression coefficients and incremental explanatory power related to book value (earnings) have decreased (increased) over this time period. In addition, our results are robust to sensitivity analyses that (1) include controls for factors affecting the demand for and supply of electricity; (2) test the predictions using a "changes," as opposed to "levels," methodology; and (3) isolate regulatory assets from other components of book value.

Note: This is a description of the paper and not the actual abstract.

JEL Classification: G12, L43, M41, M44

Suggested Citation

Blacconiere, Walter G. and Johnson, Marilyn F. and Johnson, Mark S., Market Valuation and Deregulation of Electric Utilities. Journal of Accounting & Economics, Vol 29, No 2, April 2000, Available at SSRN: https://ssrn.com/abstract=241160

Walter G. Blacconiere (Contact Author)

Indiana University - Kelley School of Business - Department of Accounting ( email )

1309 E. 10th Street
Bloomington, IN 47405
United States
812-855-2653 (Phone)
812-855-4985 (Fax)

Marilyn F. Johnson

Michigan State University - Department of Accounting & Information Systems ( email )

270 North Business Complex
East Lansing, MI 48824-1034
United States
517-432-0152 (Phone)
517-432-1101 (Fax)

Mark S. Johnson

University of Michigan at Dearborn

4901 Evergreen Road
School of Management Department of Accounting & Finance
Dearborn, MI 48128-1491
United States
313-593-4078 (Phone)
313-593-4071 (Fax)

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