A Comparison between Ohlson 95 Model and Discounted Cash Flow: Empirical Evidence from Iran. Zahra Poorzamani 1 Mohammad Pouranfar 2

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1 hp:// A Comparison beween Ohlson 95 Model and Discouned Cash Flow: Empirical Evidence from Iran Zahra Poorzamani Mohammad Pouranfar 2 Deparmen of Accouning, Cenral Tehran branch, Islamic Azad Universiy, Tehran, Iran 2 Suden of Accouning, Deparmen of Accouning, Cenral Tehran branch, Islamic Azad Universiy, Tehran, Iran zahrapoorzamani@yahoo.com Absrac: This sudy compares he discouned cash flow approach and ohlson 95 mehods. In heory discouned cash flow and ohlson95 approaches are equal, hence his sudy deecs wheher i is possible o asue ha one approach has a privilege o he oher form. The wo valuaion models are analyically compared. This sudy presens ha if users presen uncomplicaed hypoheses in heir valuaion, hey presen prejudices in heir corporaion value esimaions. Finally, due o he fac ha framework for predicing is usually on he basis of accrual accouning and also he budge conrol is mos of he ime on he basis of accouning numbers raher han cash flow numbers, i is probable ha corporaion value esimaion on he basis of accrual accouning concepions and financial saemen analysis is more concisely han he laer. [Zahra Poorzamani Mohammad Pouranfar. A Comparison beween Ohlson 95 Model and Discouned Cash Flow: Empirical Evidence from Iran. J Am Sci 203;9(3):40-47]. (ISSN: ). hp:// 7 Key words: Ohlson95, Discouned cash flows, Discoun rae, Book value. INTRODUCTION In he pas decade, he ohlson95 mehod and he discouned cash flow mehod (DCF) have received highlighing aenion. In spie of he heoreical approach he ohlson95 mehod is presened in Edwards and Bell (9) and Ohlson (995). The DCF approach can be perceived in mos finance exs. See, e.g. Copeland e al. (990). Theoreical equivalence on he basis of sric hypoheses boh he OL95 and DCF mehods provide corresponding corporaion value esimaions in han he DCF mehod for corporaion valuaion while i is uninfluenced by accouning approaches (Copeland, Koller, & Murrin, 990). However, Ohlson (995) mehod is unrelaed o various accouning approaches if i is uilized in he prediced financial saemens. Recenly, Penman and Sougiannis (998) and Francis, Olsson, and Oswald (2000) researched empirically he validiy of OL95 and DCF mehods. Boh surveys found ha he OL95 provides more precise corporaion value esimaions han he DCF mehod. However, due o he fac ha boh valuaion mehods are on he basis of he similar heoreical framework, an appropriae conducion would refer ha boh mehods provide alike corporaion value esimaions. This sudy presens ha if users presen uncomplicaed hypoheses in heir valuaion, hey presen prejudices in heir corporaion value esimaions. This quesion refers o wo issues. Firs, Olsson (998) saes ha shorening he hypoheses are usually presened when unlike valuaion mehods are used in pracice. Due o he fac ha shorening hypoheses presen prejudice in he corporaion value esimaions, hey are probable o influence corporaion value esimaions on he basis of he OL95 and DCF approaches unlikely. Levin and Olsson (2000) presen ha if he consan condiion is no achieved when he erminal value is calculaed, he OL95 approach provides more accurae corporaion value esimaions han he DCF approach. This sudy examines if one of he valuaion approaches has sysemaically privilege o he oher when shorening hypoheses are presened. Second, an aracive valuaion approach should be easy o uilize and i should help he user o conduc beer corporaion value esimaions (Penman & Sougiannis, 998). To insance valuaion approaches which are on he basis of measures ha exhibi he value producion raher han he value disribuion are easier o undersand and inerpreaion and are herefore analyically aracive (Penman, 992). Thus, his sudy evaluaes wheher he wo valuaion approaches are analyically aracive from a user aspec. This sudy presens ha shorening hypoheses influence corporaion value esimaions unlikely. In some cases he OL95 approach provides more accurae corporaion value esimaions, while in ohers he DCF approach provides more accurae esimaions. Finally, his survey saes ha due o he fac ha he framework for predicing is on he basis of accrual accouning and due o he fac ha budge conrol is usually on he basis of accouning numbers raher han cash flow measures, i can be logical o esimaion corporaion values on he basis on conceps and financial raios acknowledged from accrual accouning and financial saemen analysis, i.e. he OL95 approach. The research quesion addressed in his sudy has pracical imporance. If 40

2 hp:// shorening hypoheses are presened in corporaion valuaion, his sudy presens ha i is imporan o know he influence on corporaion value esimaions. Depending on he ype of hypohesis presened, he influence on corporaion value esimaions can be highlighing. 2. The heoreical equivalence of he OL95 and DCF approaches This sudy is no accordan wih up o dae conservaive accouning. Similar consequens are repored in previous US research and hey are saisically highlighing. The sample used in his sudy is edged o huge corporaions ha have been in operaion for a long ime. Due o he fac ha huge Japanese corporaions end o own land and securiies ha were acquired a long ime ago, hese asses are regisered a hisorical coss and should diminish he book value of equiy, which produces abnormal achievemens. However, he consequen here does no give suppor o his heory. The basic model for corporaion valuaion is he dividend discoun model (DDM) (Miller & Modigliani, 9). When invesors purchase socks, hey expec o gain wo caegories of cash flow dividend in he period during which he sock is owned, and he expeced sales price a he end of he period. In he exreme illusraion, he invesor keeps he sock ill he corporaion is liquidaed; in his condiion, he liquidaing dividend becomes he sales price. Under he hypohesis of an unlimied ime scope, he DDM can be represened as: = () Where P is he corporaion value, div he dividends, and he cos of capial. The esimaion of marke value of a corporaion s equiy should no be influenced by he valuaion approach used, so i is imporan o make sure ha he valuaion approaches are concepually equal o each oher. Due o he fac ha he DDM is he heoreically correc model, i may be surprising o someone ha a grea deal of effor and resources are used o develop selecive valuaion approaches. One reason is ha under he DDM, dividends are more reaed as he disribuion han he producion of wealh. Penman (992, p. 47) saes i as he dividend puzzle price is on he basis of fuure dividends bu perceived dividends do no ell us anyhing abou price. Ideally, he valuaion approach chosen incorporaes hose variables ha exhibi he producion of wealh raher han he disribuion of wealh. Among oher hings, his will ease he inerpreaion of corporaion value esimaions for boh financial analyss and invesors. The OL95 approach was presened by Edwards and Bell (9) and subsequenly furher developed by Peasnell (982) and Ohlson (995). I is exraced from he DDM. OL95 is a variaion of he beeracknowledged EVA approach (Sewar, 99); i measures corporaion value from an equiy-holder s aspec raher han from a lender s and an equiyholder s aspec (EVA approach). The OL95 approach can be (T. Plenborg / Scand. J. Mgm. 8 (2002) ) represened as: = + (2-a) The OL95 approach can also be represened in erms of financial raios: = + (2-b) where NI is he ne income, BV he book value of equiy, and ROE he reurn on equiy. To summarize, OL95 approach in (2a) and (2b) consiss of wo erms: book value of equiy a he valuaion dae and he presen value of fuure residual income. For his goal, residual income is showed as he difference beween ROE and ke muliplied by he book value of equiy. As eiher he rae in book value or residual income inensifies, he difference beween a corporaion s esimaion value and is book value inensifies. In oher words, invesors are only ending o pay a premium for he book value of equiy if i is possible o achieve a rae of reurn on equiy more han he equiy cos of capial (i.e. he corporaion produces posiive residual income). The DCF approach can be found in mos of he financial exs (Rappapor, 98; Copeland e al., 990). Penman (997) presens ha he DCF and he OL95 Approaches are heoreically equal. On he basis of DCF, i is possible o evaluae corporaion value from an equiy-holder s aspec (DCFE): = (3-a) Where FCFE is he free cash flow of equiy-holders. The DCF approach id saed in a form ha reflecs he value of he corporaion, ha include he ineress of boh deb and equiy-holders (DCFF): = (3-b) Where EV is he corporaion value (boh ineres bearing deb and equiy), FCFF is free cash flow of he corporaion and WACC is he weighed average cos of capial. (3a) and (3b) provide he similar equiy value esimaions if accordan hypoheses are made abou growh in wo cash flow approaches and if ineres-bearing deb is precisely priced. Do he OL95 and DCF approaches provide he similar corporaion value esimaions in pracice? Bernard (995), using only he firs 4 year of predic daa, consequens ha he OL95 approach covers 8 per cen of a corporaion s sock price, while he DDM covers only 29 per cen. Using a lile various approach, Plenborg (999) consequens similar consequens when comparing he informaion conen of achievemens and cash flows. On he basis of 4

3 hp:// Danish daa, Plenborg consequens ha four years of cumulaive achievemens describes 22 percen of he sock price variaion in he similar measuremen period. In comparison, cumulaive free cash flows describe less han per cen of he sock price variaion in he similar four-year period. The consequens of boh Bernard and Plenborg show ha he required predic period is shorer for he OL95 approach han for he DDM/DCF approach. Penman and Sougiannis (998) and Francis e al. (2000) compare he reliabiliy of corporaion value esimaions on he basis of he DDM, OL95 and DCF approaches, respecively. Albei boh sudies use US daa, a primary difference beween hem is ha he prediced daa are considered unlikely. Francis e al. use Value Line s predic daa while Penman and Sougiannis use realized daa as esimaions of hisorical predics.8 Despie he various sources of predic daa, boh sudies exhibi ha he OL95 approach provides less prejudiced corporaion value esimaions han he DDM and he DCF approaches. This consequen is no sensiive o various mehods o calculae he erminal value. However, he OL95 approach did no conduc regularly well when erminal value calculaions are imporan. This is he case when he book value of equiy is a bad clue of corporaion value. The Penman and Sougiannis (998) and Francis e al. (2000) sudies sugges ha he OL95 approach provides more accurae corporaion esimaions han he DDM and he DCF approaches. However, heir consequens conflic wih he consequen in Secion 2 ha he OL95 and DCF approaches are boh inherenly on he basis of he DDM and hus, from a heoreical aspec, should provide he similar corporaion value esimaions. Plenborg (2000) also consequens ha he hree valuaion approaches produce he similar poin esimaion of corporaion value in pracice, if he similar hypoheses are used. This shows ha neiher Penman and Sougiannis nor Francis e al. have aken ino accoun ha he similar hypoheses mus be used. An examinaion of heir es mehods shows ha his is he case oo. For insance, he growh raes used o calculae he erminal value are se a 0 and 4 per cen in boh surveys. Thus, he associaion beween he prediced financial saemens and he inpu in he various valuaion approaches is mos probable in accordan. Furher, boh sudies omi he growh ha usually influences he free cash flow negaively. They sele he growh rae wihou a corresponding selemen of he free cash flow. Finally, he DCF approach measures corporaion value from a combinaion of equiy-holder and lender aspec, while he OL95 approach measures corporaion value from an equiy-holder s aspec only. As exhibiion by Damodaran (994, p. 4), he growh rae does no have o be he similar in he wo valuaion approaches due o effec of leverage. Penman and Sougiannis (998, p. 354) debae he usefulness and uselessness of hese wo predicing mehods.t. Plenborg / Scand. J. Mgm. 8 (2002) Albei he ess conduced by Francis e al. and Penman and Sougiannis are no More graifying han he hypoheses on heir basis, he consequens do provide some useful perspecives ino corporaion valuaion. If he valuaion approaches are no properly used, he approaches provide various corporaion value esimaions. This is also sressed by Olsson (998, p. XII): one ypically makes various shorening hypoheses along he road when implemening he various models Fand various hypoheses may cause quie subsanial variaions in he consequence value esimaions. More han ha, he sudies of Penman and Sougiannis and Francis e al. show ha if he inernal corresponding beween he hree valuaion approaches is violaed, he OL95 approach should be preferred for corporaion valuaion a he expense of he DDM and DCF approaches. The quesion is, however, wheher he consequens in boh Penman and Sougiannis and Francis e al. are able be generalized o all ypes of shorening hypoheses, or wheher he consequens are a consequen of he shorening hypoheses presened in he sudies. 3. The influence of shorening hypoheses (misspecificaion) on corporaion value esimaions This secion explores he consequences of shorening hypoheses on corporaion value Esimaions on he basis of OL95 and DCF, respecively. While a range of shorening hypoheses could be considered, his sudy is inspired by Penman and Sougiannis and Francis e al. As showed above, Penman and Sougiannis and Francis e al. make a number of shorening hypoheses where he inernal corresponding beween he prediced financial saemens and he valuaion approaches is violaed. This leads o prejudiced corporaion value esimaions. Few of he hypoheses are as follows:.arbirary growh hypoheses for erminal value calculaions. 2. The use of long-erm (arge) capial srucure in he WACC calculaion (raher han he use of weighs used by he prediced balance shee) and consan coss of deb and equiy. Due o he fac ha heory suggess ha cos of equiy is a posiive funcion of financial leverage, a hird ype of shorening hypohesis is examined oo. 3. The use of long-erm (arge) capial srucure in he WACC calculaion (raher han he use of weighs used by he prediced balance shee) and seled cos of equiy (considering he risk of he corporaion changes as he marke deb o equiy raio changes). In order o 42

4 hp:// examine he effec of he hree ypes of shorening hypoheses on corporaion value esimaions, an insance is consruced where prediced financial saemens ha include he cos of capial are prepared. 4. Arbirary growh hypoheses for erminal value calculaions In he firs insance he growh rae from he prediced financial saemens deviaes from he growh rae which is used in he erminal erm of he OL95 and DCF approaches. As poined ou above, his violaes he inernal corresponding beween he prediced financial saemens and he OL95 and DCF approaches. In a associaed sudy, Levin and Olsson (2000) presens ha if he parameers (value drivers) are no consan in he erminal period, he growh rae in he prediced financial saemens will no also be consan and so violaes he hypohesis of a consan growh rae in he erminal erm. They exhibi ha i leads o prejudiced corporaion value esimaions. Furher, he OL95 approach can provide less prejudiced corporaion value esimaions han he DCF approach. In order o examine he influence of he shorening growh hypohesis, he growh rae used in he OL95 and DCF approaches is various from he 0 per cen growh rae assumed in he prediced financial saemens. Specifically, he growh rae deviaes hree percenage poins from he growh rae assumed in he prediced financial saemens. Due o he fac ha unprejudiced accouning is assumed in he insance and he inernal rae of reurn equals he cos of capial, consequenly residual income is equal o zero. In he second insance, he weighs in he WACC formula are various from he used weighs in he prediced balance shee (deb and equiy) and he coss of deb and equiy are assumed o be consan across various capial srucures. Boh Penman and Sougiannis and Francis e al. use a arge capial srucure and consan coss of deb and equiy. However, in order o make sure heoreical equivalence beween he OL95 and DCF approaches, Levin and Olsson (995) exhibi ha he weighs used by he prediced deb and equiy should be used. Ideally, he cos of equiy (and deb) should also be seled according o he capial srucure in order o reflec he sriking financial risk (Gregory, 992) 5. The predicion as well as budge conrol of accouning numbers and free cash flows An imporan sigh of corporaion valuaion is he qualiy of he predicions. The variables ha need o be prediced in he OL95 and DCF approaches, which used ha financial analysis, are various may concenrae on various issues when carrying ou heir corporaion valuaions according o one or he oher approach. The ROE (accouning numbers) is in focus in he OL95 approach, while free cash flows are in concenraion in he DCF approach. Several recen sudies have examined he predicion of achievemens and cash flows. Plenborg (99) consequens ha he ime series paerns of achievemens are more sable relaive o various cash flow measures including free cash flows. Shroff (998) consequens ha achievemens have lower variance, higher correlaion wih reurns and higher predicion abiliy for reurns han cash flows. Finally, Dechow, Kohari, and Was (998) consequen ha up o dae achievemens by hemselves are a more graifying predic of fuure cash flows han he up o dae cash flow. These consequens may also describe why he value driver concep, which is on he basis of accouning numbers and financial raios, is suggesed for he predicing of boh accouning numbers and free cash flows (Copeland e al., 990; Sickney & Brown, 999). As menioned above, ROE is he primary value driver in he OL95 approach and i is well designed ha he ROE is able o be decomposed ino a number of sub-value drivers like profi margin, asse urnover, ineres provide and financial leverage. Nissim and Penman (999) illusrae a framework for decomposing he ROE. Ineresingly, financial analyss already focus on ROE. The OL95 approach, herefore, meshes nicely wih mos of he financial saemen analysis conceps used in pracice. The DCF approach focuses on he esimaion of cash flows and herefore, focuses on he value drivers ha influence cash flows. There is ofen a connecion beween value drivers ha influence cash flows and he raios used in he financial saemen. T. Plenborg / Scand. J. Mgm. 8 (2002) analysis, as is also illusraed by Nissim and Penman (999). However, when a predic on he basis of value drivers is ransformed from accouning numbers ino free cash flows, some obvious links beween he financial saemen analysis and he DCF approach are los. For insance, financial analyss rarely use budge conrol of free cash flows. On he oher hand, i can be more inuiive (and more probable) ha budge conrol is on he basis of accouning numbers and is summarized in financial raios ha are on he basis of accouning daa. Due o he fac ha he framework for predicing is on he basis of accrual accouning and due o he fac ha budge conrol is usually on he basis of accouning numbers raher han cash flow measures, i can be logical o esimae corporaion values on he basis of conceps and financial raios acknowledged from accrual accouning and financial saemen analysis, i.e. he OL95 approach.. Research variables 43

5 hp:// Table : The variables of he research corporaion value a he end of year BV T NI ( E ( ri ) BV ) ( r ) V BV NI book value of equiy a he end of year Ne profi a he end of year book value of equiy in he begining of year BV capial expense of normal sock E ( r i ) + *( profi of corporaion porfolio profi risk free expeced profi of corporaion Sysemaic risk Fair value free cash flow operaing cash flows in he period of Invesmen cash flows in he period of discoun rae T FCF ( r) OCF ICF %2 V FCF Co Ci R 7. Research mehod 7.. Sample selecion The sample daa were obained using he TSE daabase of Tehran sock marke and daa provided by Tehran securiies exchange Associaion. The daa for companies are colleced from 2007 and 20 on he following condiions: 7.2. Sample daa (i) he corporaions are lised on he Tehran Sock Exchange (TSE), (ii) he accouning period ends in Esfand, (iii) banks, securiies corporaions, and insurance corporaions are excluded, (iv) A minimum of 5 consecuive years of accouning daa is available for each corporaion included in he sample Table 2: Frequency of disribuion of corporaions of insances due o indusry Number of sampels Indusry Oher mines exracion 2 Meal exracion Publishing, prining & muliplicaion 7 Auomobile & manufacuring spare pars 3 Manufacuring meal producs Oher non meal mineral producs Invesmens 9 Cemen, lime & gach 2 Oil, Coke & nuclear fuel produc Main meals Hard sugar & sugar Tile & seramic culumn

6 hp:// Analysis consequens Rubber & plasic Elecric ools machinery Machinery & equipmens Wooden producs Chemical producs Nuriious & drinking producs excep hard sugar and sugar Texile Medical producs and maerials Toal Figure : Average of corporaion value of corporaions on he basis of Ohlson(995), DCF and fair value Consequens of correlaion analysis for second hypohesis: Table 3: Consequens of Wilcoxon signed ranks es Tes Correlaion -saisics S- P- Meaningful Consequen coefficien saisics Value level Spearman correlaion coefficien / 000 % 95 Refused Kendal correlaed coefficien / 000 % 95 Refused Table 4: Consequens of correlaion coefficien Tes Correlaion - S- P- Meaningful Consequen coefficien Saisics saisics Value level Spearman correlaed coefficien / 000 % 95 Refused Kendal correlaed coefficien / 000 % 95 Refused Table 5: Consequens of Wilcoxon signed ranks es Levels Numbers Average of levels Saisics-z Asymp. Sig Consequen Negaive levels / 000 Confirmed Posiive levels Table : Consequens of correlaion coefficien Tes Ohlson s model wih fair value DCF model wih fair value Spearman correlaed coefficien Kendal correlaed coefficien

7 hp:// Panel A of Figure presens he consequens of he Consequens of correlaion analysis beween Ohlson (995) and fair value of he corporaions. The spearman correlaion coefficien beween wo model equals o 0.75 and P-value is under This shows ha Ohlson s model and fair value of corporaions are posiively correlaed. This is confirmed by saisics of Kendal Correlaion coefficien so ha Kendal correlaion coefficien beween wo models is 0.4 and he P-value is under Panel A of Table 3 presens he consequens of he Consequens of correlaion analysis beween discouned cash flows and fair value of he corporaions. The spearman correlaion coefficien beween wo model equals o and P-value is under This shows ha discouned cash flows and fair value of corporaions are posiively correlaed. This is confirmed by saisics of Kendal Correlaion coefficien so ha Kendal correlaion coefficien beween wo models is and he P- value is under As Table 4 presens, he correlaion beween Ohlson(995) and fair value is higher han he correlaion beween discouned cash flows and fair value so he difference beween Ohlson(995) and fair value is less han he difference beween discouned cash flows and fair value. 8. Conclusions Due o he fac ha he OL95 and DCF approaches are heoreically equal, hey boh provide he similar corporaion value esimaions if used properly and accordanly. If he valuaion approaches are no properly used, hey can easily provide prejudiced corporaion value esimaions in pracice. This sudy presens ha shorening hypoheses influence corporaion value esimaions unlikely. Given he uncerainy surrounding corporaion valuaion in pracice, he use of shorening hypoheses may seem accepable. Levin and Olsson (998, p. 287) sae ha one someimes hears commens o he effec ha i is no worh he exra effor o use correc and precise calculaion mehods when valuing corporaions, due o he fac ha here is so much doub in he daa ha mus exceedingly be fed ino he model. However, as exemplified in up o dae research, he influence of shorening hypoheses on corporaion value esimaions may be highlighing. Accordingly, i is imporan ha praciioners presen shorening hypoheses in heir corporaion valuaion are aware of he influence of hese on corporaion value esimaions. In a relaed commen, Levin and Olsson (998, p. 287) poin ou ha uncerainy is addiive. The fac ha here is a lo of doub in he daa should really spur he analys even more o wha he or she can do o reduce he over-all uncerainy. Fuure researchers wihin his area may wan o examine how praciioners use various valuaion approaches. Due o he fac ha he influence of shorening hypoheses on corporaion value esimaions may be highlighing, and due o he fac ha he inroducion of shorening hypoheses influences corporaion value esimaions in a predicable way, an undersanding of he exen and ypes of shorening hypoheses presened by praciioners is valuable. Acknowledgmens The auhor graefully acknowledges he helpful commens and suggesions of Azia Jahanshad and anonymous referees Ali Roohi. References. Copeland, T., Koller, T., & MurRIn, J. (990), Valuaion: Measuring and managing he value of companies. New York: Wiley. T. Plenborg / Scand. J. Mgm. 8 (2002) Damodaran, A. (994). Damodaran on valuaion: Securiy analysis and for invesmen and corporae finance. New York: Wiley. 3. Dechow, P., Kohari, S. P., & Was, R. L. (998). The relaion beween achievemens and cash flows. Journal of Accouning and Economics, Edwards, E. O., & Bell, P. W. (9), The heory of and measuremen of business income. Berkeley, CA: Universiy of California Press. 5. Francis, J., Olsson, P., & Oswald, J. (2000), Comparing accuracy and describe abiliy of dividend, free cash flow and abnormal achievemens equiy value esimaions. Journal of Accouning Research, Gregory, A. (992), Valuing companies, Wood head-faulkner. 7. Levin, J., & Olsson, P. (995), Looking beyond he scope and oher issues in corporaion valuaion, Research Repor, Sockholm School of Economics, he Economic Research Insiue. 8. Levin, J., & Olsson, P. (998), Corporaion valuaion wih a periodically seled cos of capial, published. In: Olsson, P. (Ed.), Sudies in corporaion valuaion, Sockholm School of Economics. 9. Levin, J., & Olsson, P (2000), Terminal value echniques in equiy valuaion Implicaions of he consan sae hypohesis, Research Repor, Sockholm School of Economics, he Economic Research Insiue. 0. Miller, M. H., & Modigliani, F. (9), Dividend policy, growh, and he valuaion of shares. Journal of Business, (4),

8 hp:// Nissim, D., & Penman, S. (999), Raio analysis and equiy valuaion. Working sudy, Columbia Universiy. 2. Ohlson, J. (995). Achievemens, book values, and dividends in equiy valuaion. Conemporary Accouning Research, Olsson, P. (998). Sudies in corporaion valuaion. Sockholm School of Economics. 4. Peasnell, K. (982). Some formal connecions beween economic values and provides and accouning numbers. Journal of Business, Finance and Accouning, Penman, S.H. (992). Reurn o fundamenals. Journal of Accouning, Audiing and Finance, Penman, S.H. (997). A synhesis of equiy valuaion echniques and he erminal value calculaion for he dividend discoun model. Review of Accouning Sudies, Penman, S.H., & Sougiannis, T. (998). A comparison of dividend, cash flow, and achievemens approaches o Equiy valuaion. Conemporary Accouning Research, Plenborg, T. (99). The informaion conen of accrual and cash flow based conducance measuresffrom a Danish and US aspec. Ph.D. disseraion, Copenhagen Business School. 9. Plenborg, T. (999). An examinaion of he informaion conen of Danish achievemens and cash flows. Accouning and Business Research, Plenborg, T. (2000). Vrdianselse i praksis med henholdsvis DDM, ri-og DCF modellen. Revision og Regnskabsvوsen, Rappapor, A. (98). Creaing shareholder value. New York: Free Press. 22. Shroff, P. (998). Properies of accrual income, cash flow and securiy reurn: An inerpreive exercise. Issues in Accouning Educaion, Sewar, J. (99). The ques for value. New York: Harper Business. /30/203 47