Valuation and Growth Rates Manipulation

42 Pages Posted: 21 Apr 2002

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: February 6, 2002


Valuation requires the prediction of future growth rate of persistent earnings, which depend on past and present internal, unobservable, investment decisions. In this study, we investigate the "management" 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 manager's choice of efforts might yield a series of increasing expected growth rates, contrary to owners' preferences. Consequently, the extrapolation of expected future earnings of an owner-controlled firm should differ from that of a management-controlled firm.

Keywords: Valuation, moral hazard, growth rates, smoothing

JEL Classification: C7, D0, G0, G3, M4

Suggested Citation

Gavious, Arieh and Ronen, Joshua and Yaari, Varda Lewinstein, Valuation and Growth Rates Manipulation (February 6, 2002). Available at SSRN: or

Arieh Gavious

Ono Academic College ( email )

Kyriat Ono

Ben-Gurion University ( email )

Beer-Sheva 84105

Joshua Ronen (Contact Author)

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

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics