The value relevance of accounting numbers on the São Paulo Stock Exchange under the Ohlson framework: an evaluation of the Residual Income Valuation and Abnormal Earnings Growth Models

Authors

  • Alexsandro Broedel Lopes Universidade de São Paulo; Faculdade de Economia, Administração e Contabilidade; Departamento de Contabilidade e Atuária
  • Dimitri Pinheiro de Sant'Anna Universidade de São Paulo; Faculdade de Economia, Administração e Contabilidade; Departamento de Contabilidade e Atuária
  • Fábio Moraes da Costa Fundação Instituto Capixaba de Pesquisas em Contabilidade, Economia e Finanças

DOI:

https://doi.org/10.1590/S0080-21072007000400009

Keywords:

firm valuation, Ohlson, Residual Income Valuation, Abnormal Earnings Growth

Abstract

This paper investigates the relevance of book value of equity for firm valuation in Brazil. This paper compares two models: Residual Income Valuation (RIV) and Abnormal Earnings Growth (AEG). The RIV model does incorporate book value of equity and the AEG models does not. This paper tests the two approaches using data from the São Paulo Stock Exchange in the period from 1994 to 2003. Based on the characteristics of the Brazilian market we expect book value to dominate earnings in terms of value relevance. Our results show weak evidence that the RIV model dominantes AEG model in terms of value relevance.

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Published

2007-12-01

Issue

Vol. 42 No. 4 (2007)

Section

Finance & Accounting

How to Cite

The value relevance of accounting numbers on the São Paulo Stock Exchange under the Ohlson framework: an evaluation of the Residual Income Valuation and Abnormal Earnings Growth Models. (2007). Revista De Administração, 42(4), 497-510. https://doi.org/10.1590/S0080-21072007000400009