Casting Theoretical Light on the Empirical Valuation Literature

  • Guochang Zhang
Chapter
First Online:
Part of the Springer Series in Accounting Scholarship book series (KLAS, volume 6)

Abstract

This chapter evaluates and critiques existing valuation research within the ROM framework. The literature on accounting-based valuation has been heavily dominated by empirical work, with discoveries of empirical relations coming long before the development of theoretical models. In the absence of formal models explaining how equity value should be related to reported accounting data, researchers have relied on economic intuition and valuation theories drawn from other disciplines (finance and economics) in order to design research studies and interpret their results. The purpose of this chapter is twofold. Firstly, we demonstrate that many of the salient empirical findings documented in the literature can be reconciled with the ROM and indeed are different manifestations of it. Secondly, we explain, in the context of the ROM, how the empirical valuation models used in the literature may have been misspecified.

Keywords

Real Option Adaptation Option Slope Coefficient Growth Option Positive Earning 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
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Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  • Guochang Zhang
    • 1
  1. 1.Hong Kong University of Science and TechnologyKowloonHong Kong SAR

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