Business, Management and Accounting
8 years ago

Conservative accounting policies favor discounted residual earnings over dividends model.

SSRN Electronic Journal
The Accounting Component of Discounted Residual Earnings: Some Theoretical and Empirical Implications
Richard P. Brief

Paper Summary

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The article explores how different accounting methods impact a company's earnings before it closes down, especially when looking at short timeframes. By comparing two models, researchers found that using conservative accounting policies can affect a company's residual earnings. They also discovered that excluding ending book value from the analysis can skew results in favor of one model over another.