Positive (Zero) NPV Projects and the Behavior of Residual Earnings
14 Pages Posted: 30 Aug 2000
Date Written: June 2000
Abstract
This paper analyzes the time-series behavior of residual earnings as it relates to the existence of positive NPV opportunities (or "rents"). The issue is of interest because recent papers (Lo and Lys [1999] and Holthausen and Watts [2000]) have commented on it in the context of the Ohlson [1995] model. The analysis shows that the Ohlson [1995] model rules out neither zero nor positive NPV opportunities, contrary to frequently made claims.
JEL Classification: M41, G12
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Capital Markets Research in Accounting
By S.p. Kothari
-
What is the Intrinsic Value of the Dow?
By Charles M.c. Lee, James N. Myers, ...
-
Accruals and the Prediction of Future Cash Flows
By Mary E. Barth, Donald P. Cram, ...
-
By Stephen Brown, Kin Lo, ...
-
A Comparison of Dividend, Cash Flow, and Earnings Approaches to Equity Valuation
-
By Mary E. Barth, William H. Beaver, ...
-
Investor Valuation of the Abandonment Option
By Philip G. Berger, Eli Ofek, ...
-
Investor Valuation of the Abandonment Option
By Peter Berger, Eli Ofek, ...
-
Accounting Conservatism, the Quality of Earnings, and Stock Returns
By Stephen H. Penman and Xiao-jun Zhang
-
Ratio Analysis and Equity Valuation
By Doron Nissim and Stephen H. Penman