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- Title
Discussion of "Residual Income and Value-Creation: The Missing Link".
- Authors
Ohlson, James A.
- Abstract
This article presents the author's comments on the paper "Residual Income and Value-Creation: The Missing Link," by John O'Hanlon and Ken Peasnell. A backward-looking analysis of residual income in this paper is not only of mathematical interest, as it extends the usual forward-looking residual income valuation relationship, but also critical to the concept inherent in residual income and its applications. The retrospective residual income formula takes on a more central role as compared to the usual prospective formula. Book value represents an investment concept, residual income meshes naturally with performance evaluation. But performance evaluation is intrinsically backward-looking. Thus it makes obvious sense to cast residual incomes in a formula which looks backward rather than forward.
- Subjects
INCOME; INVESTMENTS; COST; PERFORMANCE; RATE of return; MATHEMATICAL models
- Publication
Review of Accounting Studies, 2002, Vol 7, Issue 2/3, p247
- ISSN
1380-6653
- Publication type
Article
- DOI
10.1023/A:1020234304861