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Article: Heterogeneous investment opportunities in multiple-segment firms and the incremental value relevance of segment accounting data

TitleHeterogeneous investment opportunities in multiple-segment firms and the incremental value relevance of segment accounting data
Authors
KeywordsDivergence of profitability
Incremental value relevance
Segment growth opportunity
Segment accounting data
Real options
Issue Date2003
Citation
Accounting Review, 2003, v. 78, n. 2, p. 397-428 How to Cite?
AbstractApplying a real-options-based valuation approach, we develop and test a model that addresses the incremental value relevance of segment data beyond firm-level accounting data. Prior studies (e.g., Zhang 2000; Biddle et al. 2001) show that equity valuation requires accounting data (in part) because accounting provides signals that guide capital investments underlying value creation. In this study, we establish that the usefulness of segment data beyond aggregate data relates to heterogeneity of investment opportunities across segments, caused by divergences of segment profitability and growth potential. Empirical results are consistent with the model's predictions. We also assess the magnitude of the valuation impact of segment information relative to that of firm-level information.
Persistent Identifierhttp://hdl.handle.net/10722/233759
ISSN
2015 Impact Factor: 1.953
2015 SCImago Journal Rankings: 4.478

 

DC FieldValueLanguage
dc.contributor.authorChen, Peter F.-
dc.contributor.authorZhang, Guochang-
dc.date.accessioned2016-09-27T07:21:34Z-
dc.date.available2016-09-27T07:21:34Z-
dc.date.issued2003-
dc.identifier.citationAccounting Review, 2003, v. 78, n. 2, p. 397-428-
dc.identifier.issn0001-4826-
dc.identifier.urihttp://hdl.handle.net/10722/233759-
dc.description.abstractApplying a real-options-based valuation approach, we develop and test a model that addresses the incremental value relevance of segment data beyond firm-level accounting data. Prior studies (e.g., Zhang 2000; Biddle et al. 2001) show that equity valuation requires accounting data (in part) because accounting provides signals that guide capital investments underlying value creation. In this study, we establish that the usefulness of segment data beyond aggregate data relates to heterogeneity of investment opportunities across segments, caused by divergences of segment profitability and growth potential. Empirical results are consistent with the model's predictions. We also assess the magnitude of the valuation impact of segment information relative to that of firm-level information.-
dc.languageeng-
dc.relation.ispartofAccounting Review-
dc.subjectDivergence of profitability-
dc.subjectIncremental value relevance-
dc.subjectSegment growth opportunity-
dc.subjectSegment accounting data-
dc.subjectReal options-
dc.titleHeterogeneous investment opportunities in multiple-segment firms and the incremental value relevance of segment accounting data-
dc.typeArticle-
dc.description.natureLink_to_subscribed_fulltext-
dc.identifier.scopuseid_2-s2.0-0038401009-
dc.identifier.volume78-
dc.identifier.issue2-
dc.identifier.spage397-
dc.identifier.epage428-

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