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Indirect Valuation and Earnings Stability: Within-Company Use of the Earnings Multiple

In: The Impact of Globalization on International Finance and Accounting

Author

Listed:
  • Michal Kaszas

    (Institute of Strategic Investments, University of Economics Prague)

  • Karel Janda

    (Institute of Strategic Investments, University of Economics Prague
    Institute of Economic Studies, Charles University)

Abstract

This paper investigates statistical significance of earnings stability in the within-company indirect valuation method. We empirically establish superiority of a within-company earnings multiple valuation technique for the relatively most stable companies. Favorable empirical results are robust against different means of operationalization of the stability construct and valuation multiples. Results of this paper indicate that the indirect within-company price-to-earnings valuation yields the most precise and the most accurate value estimates.

Suggested Citation

  • Michal Kaszas & Karel Janda, 2018. "Indirect Valuation and Earnings Stability: Within-Company Use of the Earnings Multiple," Springer Proceedings in Business and Economics, in: David Procházka (ed.), The Impact of Globalization on International Finance and Accounting, pages 161-172, Springer.
    • Handle: RePEc:spr:prbchp:978-3-319-68762-9_18
    DOI: 10.1007/978-3-319-68762-9_18
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    Cited by:

    1. Karel Janda, 2019. "Earnings Stability and Peer Company Selection for Multiple Based Indirect Valuation," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 69(1), pages 37-75, February.

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