The Role and the Relative Importance of Financial Statements in Equity Valuation

37 Pages Posted: 29 Jan 2001

See all articles by Kobana Abukari

Kobana Abukari

Laurentian University

Vijay M. Jog

Carleton University - Eric Sprott School of Business

Bruce J. McConomy

Wilfrid Laurier University

Date Written: November 6, 2000

Abstract

Earnings, book value, dividends and other financial statement variables have been used in theoretical and empirical research as important factors in models of equity valuation. Similarly, courts of law have relied on financial variables in determining equity values of private firms. Our focus is on determining the robustness and relative rankings of these valuation models and to test the relative importance of the financial statement variables in explaining equity valuation. Our results indicate that book value and earnings related variables are the most important variables for Canadian equity valuation. In addition, dividend levels are found to be relevant in equity valuation; and valuation formulas that incorporate industry relatives, such as certain court accepted models, perform well.

Keywords: Valuation, residual income, economic value, equity and Canadian

JEL Classification: G12, G32

Suggested Citation

Abukari, Kobana and Jog, Vijay M. and McConomy, Bruce J., The Role and the Relative Importance of Financial Statements in Equity Valuation (November 6, 2000). Available at SSRN: https://ssrn.com/abstract=254972 or http://dx.doi.org/10.2139/ssrn.254972

Kobana Abukari

Laurentian University ( email )

935 Ramsey Lake Road
Sudbury P3E 2C6, Ontario P3E 2C6
Canada

Vijay M. Jog

Carleton University - Eric Sprott School of Business ( email )

1125 Colonel By Drive
Ottawa, Ontario K1S SB6
Canada
613-520-2600 (Phone)
613-520-4427 (Fax)

Bruce J. McConomy (Contact Author)

Wilfrid Laurier University ( email )

Waterloo, Ontario N2L 3C5
Canada
519-884-0710, x2890 (Phone)
519-884-0201 (Fax)

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