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- Title
Value Implications of the Proportion of Non-Operating Income.
- Authors
Anabila, Andrew Ayimbila
- Abstract
The Senate Committee that investigated Enron's collapse suggests that analysts misled the public by ignoring signals like the firm's high proportion of non-operating income. The analysts denied intentional deceit, alleging instead that they were fooled by Enron. This study examines the implications of a firm's proportion of non-operating income for its information environment and its valuation. The objective is to ascertain whether market participants' ability to value a firm decreases as the proportion of nonoperating income increases. The results show that non-operating income is associated with information asymmetry and overvaluation. These results apply to the pre- and post-Enron era, so analysts should be more critical about firms' non-operating income.
- Subjects
UNITED States; UNITED States governmental investigations; CORPORATE bankruptcy; BUSINESS ethics; ENRON Corp.; UNITED States Congressional committees
- Publication
Journal of Accounting & Finance (2158-3625), 2012, Vol 12, Issue 3, p54
- ISSN
2158-3625
- Publication type
Article