The Tax Effects of Investment in Marketable Securities on Firm Valuation: Discussion

1979 ◽  
Vol 34 (2) ◽  
pp. 339
Author(s):  
Rex Thompson
Keyword(s):  
Firm Valuation ◽  
Tax Effects

The Usefulness of Disclosures of Untaxed Foreign Earnings in Firm Valuation

2008 ◽  
Vol 30 (2) ◽  
pp. 53-77 ◽  
Author(s):  
Mark P. Bauman ◽  
Kenneth W. Shaw
Keyword(s):  
Firm Valuation ◽  
Foreign Subsidiaries ◽  
Share Prices ◽  
Current Accounting ◽  
Foreign Earnings ◽  
Tax Effects ◽  
Downward Bias ◽  
Accounting Rules ◽  
Repatriation Taxes

ABSTRACT: Under current accounting rules, U.S. multinationals are not required to record liabilities for future taxes on earnings of foreign subsidiaries, as long as those earnings are deemed to be indefinitely reinvested in those subsidiaries. These rules allow considerable flexibility in the designation of earnings deemed permanently reinvested and the reporting of expected repatriation taxes thereon. Some firms disclose amounts for unrecorded taxes on permanently reinvested earnings, but most do not. We show that while estimated repatriation taxes are relevant in explaining share prices of non-disclosing firms, they are less relevant than firm-disclosed amounts are in explaining share prices of disclosing firms. This result is due to estimated repatriation tax amounts exhibiting downward bias, and less accuracy for actual repatriation tax effects, relative to firm-disclosed repatriation tax amounts. We propose new disclosures designed to improve the relevance of estimated repatriation tax amounts.

The Effect of Underreaction and Overreaction of Firm Stocks to Firm Valuation: Data from the Indonesian Stock Exchange

2019 ◽  
Author(s):  
Yohanes Indrayono
Keyword(s):  
Behavioral Finance ◽  
Firm Value ◽  
Intangible Assets ◽  
Stock Exchange ◽  
Investor Sentiment ◽  
Firm Valuation ◽  
Good News ◽  
Industrial Sectors ◽  
Tangible Assets ◽  
Firm Profitability

<p>This study contributes to the on-going studies on behavioral finance by providing a case study on underreaction and overreaction of firm stocks to firm valuation. We use the Model of Investor Sentiment (Barberis et al., 2005) to evaluate underreaction and overreaction behavior and reflect on specific findings in the Indonesian market. The result of the study is most of the stocks in the Indonesian Stock Exchange are more overreaction to the news of firm financial statements. Firms on the industry with more intangible assets measure more overreaction than firms on industries with more tangible assets. For stocks with overreaction, the stock firm value is positively affected by a change in the total assets and profitability, but not by change of book value. The result concretized no evidence that firm stocks overreacted to the news more than underreacting. In stock industrial sectors, the financial institutions and wholesale industry stocks demonstrated remarkable overreactions. Nonetheless, automotive, building construction, food and beverage as well as cement evidenced more underreaction. For better return in financial markets, investors may buy stocks of the firm on industry with more tangible assets when there is no good news about the increasing firm profitability and sales; nonetheless, they should buy stocks of the firm on industry with more intangible assets when there is no lousy news about the increasing firm profitability and sales. </p>

Performance Volatility and Firm Valuation

2012 ◽  
Author(s):  
Jianxin Daniel Chi ◽  
Juan (Julie) Wu
Keyword(s):  
Firm Valuation ◽  
Performance Volatility
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