Accounting Comparability and the Accuracy of Peer-Based Valuation Models

Young, Steven; Zeng, Yonglian

doi:10.2308/accr-51053

Cited by 89 publications

(35 citation statements)

References 31 publications

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“…) for investors (such as shareholders and creditors) and specialized monitors (such as financial analysts and auditors) . Therefore, investors and specialized monitors are better able to evaluate the company's performance (i.e., lower estimation risk), as peer‐based comparability helps improve the valuation accuracy of analyzing the business fundamentals of the company (Young and Zeng ; Sohn ).…”

Section: Introductionmentioning

confidence: 99%

Accounting Comparability, Audit Effort, and Audit Outcomes

Zhang

2018

Contemporary Accting Res

138

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Accounting comparability among peer firms in the same industry reflects the similarity and the relatedness of firms’ operating environments and financial reporting. From the perspectives of “inherent audit risk” and “external information efficiency,” comparability is helpful for auditors in assessing client audit risk and lowers the costs of information acquisition, processing, and testing. I posit that the availability of information about comparable clients helps improve audit efficiency and accuracy. Empirical results show that comparability is negatively related to audit effort (surrogated by audit fees and audit delay). Moreover, comparability is negatively associated with the likelihood of audit opinion errors. These findings are robust to different specifications of regression models, particularly for the “endogeneity” issues due to the possible reverse causality that auditor style might influence client firms’ comparability. In sum, the study shows that accounting comparability enhances the utility of accounting information for external audits.

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Section: Introductionmentioning

confidence: 99%

Accounting Comparability, Audit Effort, and Audit Outcomes

Zhang

2018

Contemporary Accting Res

138

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“…Groups of different industries will give different risk levels, so the industry group can be a good comparison group [26]. The accuracy of the comparison group selection will improve the valuation accuracy [27]. Valuation by industry combined with growth (ROE) gives the best results compared with the industry and market, and industry combined with the size of the companies [12].…”

Section: Hypothesis Developmentmentioning

confidence: 99%

Improved Accuracy of Ratio Multiple Valuation

Saputro

Hartono

2017

SHS Web Conf.

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Abstract. Multiple valuation is widely used by investors and practitioners but its accuracy is questionable. Multiple valuation inaccuracies are due to unreliability of information used in valuation, inaccuracies comparison group selection, and use of individual multiple values. This study investigated the accuracy of valuation to examine factors that can increase the accuracy of the valuation of multiple ratios, that are discretionary accruals, the comparison group, and the composite of multiple valuation. These results indicate that multiple value adjustment method with discretionary accruals provides better accuracy, the industry comparator group method combined with the size and growth of companies also provide better accuracy. Composite of individual multiple valuation gives the best accuracy. If all of these factors combined, the accuracy of valuation of multiple ratios will give the best results.

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“…They concluded that a specific industry could not provide enough criteria, and other control factors like size, profitability and risk have to be added (Alford, 1992;Kim & Ritter, 1999;Bhojraj & Lee, 2002; E. Lie & H. J. Lie, 2002;Liu, Nissim, & Thomas, 2002López, Antón, & Cerviño, 2011;Young & Zeng, 2015;Celli, 2017;Rubio, 2019).…”

Section: Introductionmentioning

confidence: 99%

The Marketability Discount in Spanish Valuation Multiples: Investors’ Perception in Listed Companies Versus Private Transactions

Rodríguez–López

Martín

2019

Journal of Business Economics and Management

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The aim of this paper is to assess the fair marketability discount (MD) in the Spanish market for valuation multiples comparing public versus private transactions. The study finds that to obtain MD it is necessary previously to control by a battery of factors that affects ratios’ prices such as industry, firm size, profitability, risk, year and also other characteristics about the buyer. The interactions of MD with each variable showed different investors’ perceptions about non marketability enterprises explaining MD. The valuation methodology applied in the research was a cross section of 824 public and private acquisitions in the Spanish market from the period 2006−2017. This work represents important evidence, in a more integrated vision than previous literature, for analysts and regulators stressing the necessity to apply MD in Spanish valuation processes based in listed multiples.

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Accounting Comparability and the Accuracy of Peer-Based Valuation Models

Cited by 89 publications

References 31 publications

Accounting Comparability, Audit Effort, and Audit Outcomes

Accounting Comparability, Audit Effort, and Audit Outcomes

Improved Accuracy of Ratio Multiple Valuation

The Marketability Discount in Spanish Valuation Multiples: Investors’ Perception in Listed Companies Versus Private Transactions

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