An empirical assessment of proposed sSolutions for resolving scale problems in value relevance accounting research Articles uri icon

publication date

  • December 2020

start page

  • 3905

end page

  • 3933

issue

  • 4

volume

  • 60

International Standard Serial Number (ISSN)

  • 0810-5391

Electronic International Standard Serial Number (EISSN)

  • 1467-629X

abstract

  • We implement the most common empirical specifications, with different approaches to control for scale problems, used in studies on the value relevance of accounting information. We study whether the results offered by these specifications are consistent with the residual income valuation model and with the Burgstahler and Dichev option‐style valuation framework. Undeflated and per‐share specifications offer results that are more in line with both benchmarks. Other deflated specifications and approaches deviate, to different extents, from the expectations of both frameworks. We interpret these deviations as signs of misspecification.

keywords

  • accounting research; capital markets; residual income; scaleeffects; value relevance