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- Title
International equity valuation: the relative importance of country and industry factors versus company-specific financial reporting information.
- Authors
Foster, George; Kasznik, Ron; Sidhu, Baljit K.
- Abstract
The relative importance of country- and industry-specified factors vis-à-vis company-specific financial statement-based information in explaining equity valuation multiples in an international setting is examined. Both country-specific effects via previously identified variables and an indicator variable approach are analysed. While company-specific factors are predominant in explaining cross-sectional differences in valuation, country and industry factors have sizable incremental explanatory power over them; the latter are not independent, so their relative importance is influenced by how we adjust for this commonality. Using country indicators provides larger incremental explanatory power than using country-specific factors, suggesting that previously identified factors may be measured with sizeable error or omitted factors are important.
- Subjects
VALUATION; FINANCIAL statements; INFORMATION theory in economics; CROSS-sectional method; MEASUREMENT errors; BUSINESS size; ECONOMIC indicators
- Publication
Accounting & Finance, 2012, Vol 52, Issue 3, p767
- ISSN
0810-5391
- Publication type
Article
- DOI
10.1111/j.1467-629X.2011.00423.x