Accounting Standards and the Valuation of International Securities

Posted: 15 Jul 1998

See all articles by Richard M. Frankel

Richard M. Frankel

Washington University in Saint Louis - Olin Business School

Charles M.C. Lee

Stanford University - Graduate School of Business

Date Written: Undated

Abstract

We explore a new accounting-based valuation model in an international context. An appealing feature of the model is that it produces a measure of firms' fundamental value, "V", that is immune to accounting differences across countries. We explain why this model has the potential to become a "universal translator," that is, a vehicle by which accounting numbers produced under alternative systems can be translated into consistent value estimates. Conceptually, the model operates equally well under any accounting system provided a set of minimal conditions are satisfied. We define these conditions, and evaluate existing systems in the context of these conditions. We also present preliminary evidence on the efficacy of the model in explaining stock prices across countries.

JEL Classification: G12, M41

Suggested Citation

Frankel, Richard M. and Lee, Charles M.C., Accounting Standards and the Valuation of International Securities (Undated). Available at SSRN: https://ssrn.com/abstract=2548

Richard M. Frankel (Contact Author)

Washington University in Saint Louis - Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Charles M.C. Lee

Stanford University - Graduate School of Business ( email )

Stanford Graduate School of Business
655 Knight Way
Stanford, CA 94305-5015
United States
650-721-1295 (Phone)

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