Recent research concerned with enhancing conservatism corrections of linearinformation models (LIMs) reports a decrease in bias as compared to the Ohlson (1995)model. However, inaccuracy is not significantly reduced. These findings raise twoquestions: First, are LIMs able to capture...

We provide evidence that conditional conservatism could be better captured in linearinformation models (LIMs), which largely rely on analysts’ forecasts, if analysts wouldadjust their optimistic forecast for the asymmetric timeliness of earnings. Sinceadjusting the forecast requires...

Standard equity valuation approaches (i.e., DDM, RIM, and DCF) are derivedunder the assumption of ideal conditions, such as infinite payoffs and cleansurplus accounting. Since these conditions are hardly ever met, we provideextensions of the standard approaches based on the fundamental principle...

We build and test a Bayesian model that shows how investors revise their earnings persistence expectations after dividend announcements. When dividend changes confirm preceding earnings changes, our model predicts inverse u-shaped investor revisions conditional on the prior expectations for...

We document that cost stickiness is priced in the CDS market. More specifically, we show that creditors require higher risk premiums for sticky firms consistent with stickiness increasing asset volatility. In addition, we find that creditors require lower or no risk premiums if stickiness is...