The Tax Effects of Investment in Marketable Securities on Firm Valuation

Scott, James

doi:10.1111/j.1540-6261.1979.tb02093.x

Cited by 5 publications

(1 citation statement)

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“…Longbrake (1992) surveyed firms' investment and financial policies as influence factors for firm value. Baron (1975), Scott (1979), and Christie and Nanda (1994) According to Kaplan and Ruback (1995), the concept of estimating market value by calculating the discounted future cash flow is readily accepted among most economists, but until early 1990, empirical evidence for supporting whether the cash flow was a reliable indicator of market value was not sufficient. Kaplan and Ruback (1995) provided evidence of the relatedness between the transaction value, which is part of total market value of a firm, and the discounted value of their corresponding cash flow forecasts.…”

Section: Introductionmentioning

confidence: 99%

Novel Perspectives on Market Valuation of Firms via Functional Regression

2007

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The primary objective of this paper is to evaluate the association between market value and cash flow ratio, and to understand how economic instability alters it. Because this relationship is cross-temporal and may change if other financial indicators are considered, we model this relationship via multiple functional linear regression. We conclude from our multiple sectors study that market value ratio is affected by or follows cash flow mostly during the same time period and that this association weakens considerably under economic instability. We also show that for some industry sectors, while other financial indicators may drive market value, cash flow is likely to be the key player in most sectors.

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