Equity valuation and corporate control

Article Abstract:

The difference between open-market share prices and equity exchange value is illustrated by the large premiums offered for large public corporations during takeover battles. Equity valuations, independent appraisals of equity value, are usually demanded by shareholders in takeover fights. The use of accounting to estimate equity exchange values rather than justifying values to public stakeholders and interests indicates that accounting information plays a broad role in corporate governance and equity valuation. Equity valuations demand a type of accounting information that is distinct from information associated with open-market share prices in the capital market and from information typically demanded by management. Accounting information used for equity valuations affects shareholder wealth by affecting real source allocations during assertions of corporate control.

Methods, Finance, Acquisitions and mergers, Accounting

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Investor reaction to disclosures of 1974-75 LIFO adoption decisions

Article Abstract:

Cross-sectional regression analysis of last in, first out (LIFO) decisions for fiscal 1974 is used to show how stock price movements are influenced by disclosures of LIFO decisions. Tests were conducted on LIFO-adopting and non-LIFO adopting firms, with nonadopting firms showing more notable stock price response than adopting firms. However, it was noted that prior notions of investors also affected price movement. These notions concern factors influencing the disclosure decision and the information projected by the decision regarding other facets of the firm's operations.

Analysis, Accounting and auditing, Corporations, Valuation, Inventory control, Disclosure statements (Accounting)

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