This paper lays out a decomposition of book-to-price (B/P) that articulates precisely how B/P quot;absorbsquot; leverage. The B/P ratio can be decomposed into an enterprise book-to-price (that pertains to operations and potentially reflects operating risk) and a leverage component (that reflects...

This paper tests the hypothesis that irrational market misvaluation affects firms' takeover behavior. We employ two contemporaneous proxies for market misvaluation, pre-takeover book/price ratios and pre-takeover ratios of residual income model value to price. Misvaluation of bidders and targets...

Prior research shows that the cash component of earnings is more persistent than the accrual component of earnings. We investigate whether the persistence of the cash component is influenced by management's decision to retain or distribute cash flows. We find that when firms retain the cash...

This paper uses pre-offer market valuations to evaluate the misvaluation and Q theories of takeovers. Bidder and target valuations (price-to-book, or price-to-residual-income-model-value) are related to means of payment, mode of acquisition, premia, target hostility, offer success, and bidder...

We develop a comprehensive and parsimonious measure of corporate financing activities and document a negative relation between this measure and both future stock returns and future profitability. The economic and statistical significance of the results using our comprehensive measure of external...

We outline a systematic approach to incorporate macroeconomic information into firm level forecasting from the perspective of an equity investor. Using a global sample of 198,315 firm-years over the 1998–2010 time period, we find that combining firm level exposures to countries (via geographic...

We survey recent research in accounting anomalies and fundamental analysis. We use forecasting of future earnings and returns as our organizing framework and suggest a roadmap for research aiming to document the forecasting benefits of accounting information. We combine this with opinions from...