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See, for example, Peasnell (1982), cited above; Ohlson (1995), cited above; Feltham and Ohlson (1995), cited above; and J. O'Hanlon and K. Peasnell, "Wall Street's Contribution to Management Accounting: The Stern Stewart EVA Financial Management System," Management Accounting Research, Vol. 9, No. 4 (1998), 421-444. Clean surplus generally holds under u.s. accounting principles, with limited exceptions such as foreign currency translation gains and losses. Additional exceptions arise in the accounting principles of other countries.

where Dt is the net “dividends” paid to owners for period t (i.e., cash dividends plus share repurchases net of capital contributions). Solving equation (1d) for NIt, equation (3) for Dt, and substituting into the discounted dividends model (2), equity value can be expressed in terms of discounted residual income and equity book values (4a): (4a) Vt = ∑τ =1 τ =∞RI t +τ + (1 + k ) BVt +τ −1 − BVt +τ (1 + k )τ。

Further assuming that BVt+τ / (1+k)τ approaches 0 as τ approaches ∞, equity value can be expressed solely in terms of beginning book equity and discounted residual income:4 (4b) Vt = BVt + ∑τ =∞RI t +τ τ τ =1 (1 + k )

Because this relationship with equity value described in (4b) holds for residual income but not for accounting earnings (because accounting earnings does not include a charge for equity capital), one might expect that residual income should therefore be superior to accounting earnings in explaining firm values and stock returns. As we shall see, a key problem with this inference is that stock market participants only have past and current data available to estimate the model's unobservable future residual income. Thus the empirical question becomes: which measure conveys more information about future residual income – current residual income or current earnings? It could be that other metrics better reveal this future than do past and current。

EVA (discussed below) can be substituted for residual income without loss of equivalence. When applying (4b), analysts truncate the infinite series and attempt to capture residual income beyond the forecast horizon in a ‘terminal value’ term.

observations of residual income (or EVA).5 Before presenting evidence on this issue, we first describe Stern Stewart’s version of residual income called EVA. EVA® First introduced in the late 1980s, Stern Stewart’s EVA has generated considerable publicity and over 300 client adoptions to date, including major international corporations such as Coca-Cola, Eli Lilly, and Siemens.6 EVA also has attracted competitors who offer related or competing metrics. The resulting intense competition has been referred to as “metric wars” in the financial press.7 [insert figure 1 about here] Figure 1 summarizes the steps that transform underlying cash flows from operations (CFO) into Stern Stewart’s economic value added (EVA). Adjusting CFO for accounting accruals (such as depreciation and interest expense) yields bottom line accounting earnings (NI). Adding back after-tax interest expense to NI yields net operating profits after tax (NOPAT). Subtracting the current cost of both debt and equity capital from NOPAT yields本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。