The information content of the non- operating component of income as related to income prediction and equity valuation
Journal Title: Journal of Science and today’s world - Year 2013, Vol 2, Issue 7
Abstract
The present study provides evidence concerning various features of the non- operative component of income (net income minus operative income). Analysis of different features of the non- operative component of income is made based on the framework of valuation provided by Ohlson. At first, using the composite data on a sample of the companies present in Tehran Stocks Exchange (1998-2007), the four equations present in Ohlson's model are estimated as a system, using the method of apparently irrelevant regressions. Then five hypotheses relating to the features of the non- operative component of income are tested and evaluated using the estimates obtained. The findings of the study show, that the non- operative component of income has increasing information content regarding prediction of the future non- usual income as well as the market value of the company's equity. In addition, the non- operative component of income is "prediction relevant". At last, the findings show that, as predicted by Ohlson, there is a link between two features of the income components, that is, prediction relevance and value relevance.
Authors and Affiliations
Hassan Mohammadi , Shahram Izadi Ali asghar Negahdary
Keywords
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