Price Earnings- and Market Book-ratios presume a systematic link between financial statement data and company value. We analyze this relationship in a steady state model with overlapping capacity investments where company value is inferred from a constant growth residual income model. We...

We employ residual income as performance measure in a regulatory context utilizing the relative replacement cost rule (Rogerson, 2008, 2011). We find, in line with Rogerson (2008, 2011), that overall welfare is maximized if the regulator is aware of the data required to parameterize the model....

Unbiased accounting is supposed to provide perfect economic information to decision makers. We identify three notions of unbiased accounting in the literature, promoting return-, cost-, or value-disclosure as guiding principle and evaluate them based on the criterion of informational...

We examine how firms manage their foreign exchange (FX) exposure using publicly reported data on FX exposure before and after hedging with corresponding hedging instruments. Based on calculated firm-, year-, and currency-specific hedge ratios, we find that about 80 [20] percent of FX firm...

Forward price-to-earnings ratios (PE ratios) play a central role in financial analysis and valuation. They are used to value comparable firms or to inform about mispriced stocks. We show that past investment growth and conservative accounting hinder a straightforward interpretation of the PE...

We evaluate the well-known Fisher Equation in the context of accounting income with a focus on its implicit assumptions regarding capital maintenance. Our findings indicate that the Fisher Equation does not allow for a consistent conversion from nominal to real terms, given that it modifies the...

In recent issues of the Journal of Applied Corporate Finance Friedl and Schwetzler (2011) and Bradley and Jarrell (2008, 2011) voiced opposing views on the relation between the retention rate/plowback rate and the growth rate in the context of the constant growth valuation model when considering...