Discussion of 'Accrual Accounting and Equity Valuation.'
Article Abstract:
The shortcomings of Ohlson and Zhang's (1998) paper on accrual accounting and equity valuation are discussed. The researchers posited the existence of an algebraic transformation of financial accounting transactions which would facilitate the exclusive expression of firm value according to the residual earnings and net operating assets of the firm. The result is an accounting process characterized by parsimony. However, the paper does not present an economic context for this concept and consequently offers no clear accounting advantages. Nevertheless, parsimonious accounting may have benefits not discussed in the article. For one, it can enable the firm to more effectively aggregate and communicate information about value. Another economic role is borne of the fact that markets are heuristic and value a firm in terms of residual earnings and assets. Other contentions with the Ohlson and Zhang paper are discussed.
Publication Name: Journal of Accounting Research
Subject: Business
ISSN: 0021-8456
Year: 1998
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Discussion of the role of the manager's human capital in discretionary disclosure
Article Abstract:
A discussion of a study introducing new deterrents to voluntary disclosure by a manager is presented. The underlying assumption is that disclosure of the manager's private information can trigger the market to acquire further data used to reassess the manager's ability. Risk-averse managers hence view this prospect as an avoidable risk and disclose private information only if it is more favorable than a given threshold in equilibrium.
Publication Name: Journal of Accounting Research
Subject: Business
ISSN: 0021-8456
Year: 1999
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