Industry upheaval and valuation: Empirical evidence from the international oil and gas industry

Misund, Bård; Asche, Frank; Osmundsen, Petter

doi:10.1016/j.intacc.2008.09.007

Cited by 28 publications

(24 citation statements)

References 52 publications

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“…Prior studies have indicated that current earnings are a better proxy than firms' cash flow for current market value of equity (Dechow, 1994;Sloan, 1996). The Feltham-Ohlson model connects the accounting fundamentals (i.e., net book value and current earnings) to firms' market value of equity to uncover the extent of their association (Amir, 1993;Misund, Asche, and Osmundsen, 2008). Modifying a dividend-discounting model, Ohlson (1995) has developed a balance sheet model that connects firms' market value of equity with related net book value, abnormal earnings, and other information.…”

Section: Regression Modelmentioning

confidence: 99%

“…Since firm differences can influence the market value of equity, the scaling of variables is important to reduce spurious bias on R 2 , heteroscedasticity, and coefficients (Easton and Sommers, 2003;Ota, 2003). To mitigate these biases, scaling is applied to deflate variables, but there is no common agreement on a preferred deflator (Misund et al, 2008 Using the balance sheet model, this study tests the hypotheses using the following panel data regression model, as most firms are repeated observations in each regression model.…”

Section: Regression Modelmentioning

confidence: 99%

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The relation of intellectual capital disclosure strategies and market value in two political settings

Abeysekera

2011

Journal of Intellectual Capital

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Abeysekera, I. (2011). The relation of intellectual capital disclosure strategies and market value in two political settings. Journal of Intellectual Capital, 12 (2), 319-338.The relation of intellectual capital disclosure strategies and market value in two political settings AbstractPurpose -The purpose of this paper is to investigate whether the political setting (civil war versus temporary truce) in a country has an influence on firms' current narrative, visual, and numerical intellectual capital disclosure being included in the current market value of equity. Design/methodology/approach -Using content analysis for data generation, this study identifies narrative, visual, and numerical intellectual capital disclosure in firms' annual reports. Financial data were obtained from firms' annual reports and the stock exchange. Fixed effect panel regression was conducted separately for the civil war period and temporary truce period. Findings -The paper finds that during the period entirely beset by civil war, the current market value of equity includes net book value and current earnings only, and does not include narrative, visual, or numerical intellectual capital disclosure. During the period of temporary truce, the current market value of equity includes net book value, current earnings, and narrative disclosure, but not visual or numerical intellectual capital disclosure. Practical implications -The findings provide insights into the effectiveness of disclosure strategies in politically unstable environments. Originality/value -This study analyses the disclosure strategies in a civil war and temporary truce context. AbstractPurpose -This paper investigates whether the political setting (civil war versus temporary truce) in a country has an influence on firms' current narrative, visual, and numerical intellectual capital disclosure being included in the current market value of equity. Design/Methodology/Approach -Using content analysis for data generation, this study identifies narrative, visual, and numerical intellectual capital disclosure in firms' annual reports. Financial data were obtained from firms' annual reports and the stock exchange. Fixed effect panel regression was conducted separately for the civil war period and temporary truce period. Findings -During the period entirely beset by civil war, the current market value of equity includes net book value and current earnings only, and does not include narrative, visual, or numerical intellectual capital disclosure. During the period of temporary truce, the current market value of equity includes net book value, current earnings, and narrative disclosure, but not visual or numerical intellectual capital disclosure. Practical Implications -The findings provide insights into the effectiveness of disclosure strategies in politically unstable environments. Originality/Value -This study analyses the disclosure strategies in a civil war and temporary truce context. 2

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Section: Regression Modelmentioning

confidence: 99%

Section: Regression Modelmentioning

confidence: 99%

The relation of intellectual capital disclosure strategies and market value in two political settings

Abeysekera

2011

Journal of Intellectual Capital

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“…Third, the major integrated companies have been involved in a major industry restructuring during 1998-2002. Prior studies have indicated that periods of industry restructuring can result in reduced value relevance of earnings compared to cash flows (Christian and Jones, 2004;Misund et al, 2008).…”

Section: Part Ii: Effects Of Company Characteristics: Vertical Integrmentioning

confidence: 99%

Vertical Integration and Valuation of International Oil Companies

2014

Self Cite

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper studies financial statement information from the 50 largest international oil and gas companies during 1992 to 2011 and evaluates their relation to market values. In particular, we examine how this relationship is affected by accounting method choice (successful efforts versus full cost accounting) and vertical integration. We find that net income is more value relevant for full cost companies compared to companies that use the successful efforts accounting method. Furthermore, the value relevance of oil and gas reserves is different among successful efforts and full cost companies. Larger reserves among successful efforts companies are awarded a premium by stock markets. The value relevance of book value is significantly lower for integrated companies than for pure upstream companies. We also find that the value relevance of oil and gas reserves is different for upstream and integrated companies. Terms of use: Documents inJEL-Code: F230, G000, L710, M410.

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“…Most of the academicians and researchers have studied comparison of DCF, DDM and RI methods (Plenborg, 2002;Bailey et al, 2008;Velez-Pareja & Tham, 2010), effect of earnings management on firm value (Chaney & Lewis, 1995), cultural distance and firm valuation (Antia et al, 2007), Tobin's Q as an estimate of market valuation (Yermack, 1996), predicting future cash flows (Misund et al 2008) and impact of mergers on firm value (Ma et al, 2010). Antia et al (2007) examines the value impact of cultural differences that exist between foreign subsidiaries and headquarters of U.S.…”

Section: Review Of Literaturementioning

confidence: 99%

“…They found that when the decision to diversify is modelled as an endogenous choice based on firm characteristics, multi-segment firms have significantly higher Tobin's q than single-segment firms, even after controlling for factors such as ownership structure, ownership concentration, and growth opportunities. Misund et al (2008) suggest that contemporaneous earnings are more useful than current operating cash flow in predicting future cash flows and more relevant for company valuation. They found that the value relevance of cash flows actually decreased in the recent oil industry upheaval.…”

Section: Review Of Literaturementioning

confidence: 99%

Business Valuation: Modelling Forecasting Hurdle Rate

Nangia

Agrawal

2011

AJFA

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Consolidation, Combination and Diversification (CCD's) in the emerging globalized market leads to competition and escalating the monopoly power. Given the increasing liberalization of rules, regulations and law, a number of firms are going beyond national borders and making deals triumphant. We suggest an innovative firm valuation model for M&A in the area of Corporate Finance that is NRR Approach 1.0. The methodology is divided into five phases, modeling forecasting hurdle rate, finding sales growth rate, computation of free cash flows & estimation of future free cash flows and finally determination of firm value under NRR approach. The findings suggest that NRR approach considers various imperative factors while valuing target firms for the benefit of shareholders. The value of study could be credited by NRR Approach 1.0. and this is the first of its kind model considers political, transfer and commercial risk factors while estimating hurdle rate. Hence, approach is the first version of development thought and has limited scope to validate in other industries. We ISSN 1946-052X 2011 www.macrothink.org/ajfa 87 believe that NRR model shall be of great help to M&A advisory firms and investment bankers while negotiating deal value in acquisition process. This would be help in exploring new dimensions of judgment and approach for academia as well as for the benefit of target firm shareholders in corporate arena. Asian Journal of Finance & Accounting

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Industry upheaval and valuation: Empirical evidence from the international oil and gas industry

Cited by 28 publications

References 52 publications

The relation of intellectual capital disclosure strategies and market value in two political settings

The relation of intellectual capital disclosure strategies and market value in two political settings

Vertical Integration and Valuation of International Oil Companies

Business Valuation: Modelling Forecasting Hurdle Rate

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