Extended Dividend, Cash Flow and Residual Income Valuation Models - Accounting for Deviations from Ideal Conditions

Understanding Bank Valuation: An Application of the Equity Cash Flow and the Residual Income Approach in Bank Financial Accounting Statements

The aim of this paper is to present a framework to bank valuation based on two generally acceptable valuation models that are not specific to banks: the model of discounted Equity Cash Flow to Equity (ECF) and the model of discounted Residual Income (RI). As emphasized by Koller, Goedhart and Wessels (pp. 663, 2005) [1] in a bestselling book on the valuation of firms, the valuation process of a...

Dividend Policy and Cash Flow Uncertainty

Discounted Cash Flow: Accounting for Uncertainty

Valuation is the process of estimating price. The methods used to determine value attempt to model the thought processes of the market and thus estimate price by reference to observed historic data. This can be done using either an explicit model, that models the worth calculation of the most likely bidder, or an implicit model, that that uses historic data suitably adjusted as a short cut to d...

Dividend Irrelevance and Accounting Models of Value

In accounting models of value, dividends typically appear to have a strong positive relationship with value despite theoretical reasons to expect dividend displacement. We show that this result is driven by the relationship between dividends and both core earnings and other information derived from the valuation error in the prior year. Where core earnings can be effectively modelled in a speci...

Dividend Growth, Cash Flow and Discount Rate News

Using a new variable based on a model of dividend smoothing, we find dividend growth is highly predictable and cash flow news contributes importantly to return variability. Cash flow betas derived from this predictability are central to explaining the size effect in the cross section of returns. However, they do not explain the value effect; this is explained by noise betas. We also find that t...