Cash flow, earnings, and dividends: A comparison between different valuation methods for Brazilian companies

César Cupertino (), Newton Da Costa (), Reinaldo Coelho () and Emilio Menezes ()
Additional contact information
Newton Da Costa: Federal University of Santa Catarina (UFSC)
Reinaldo Coelho: State University of Santa Catarina (UDESC)
Emilio Menezes: Federal University of Santa Catarina (UFSC)

Economics Bulletin, 2013, vol. 33, issue 1, 309-322

Abstract: This paper compares three valuation models – discounted dividends, discounted cash flow, and residual earnings – using financial and accounting data from Brazilian companies, during the period of 1995 to 2004. These approaches should be theoretically equivalent when the respective companies' payoffs are predicted to infinity, but in practice they require predictions over finite horizons. So, the objective of the present study is to assess how these three models perform in finite horizon analysis and in a different financial and economic context. The conclusion was that, among the three models, the cash flow approach presented the best accuracy and explanatory power, having the current stock price as the parameter of comparison. It also had the largest number of valuations considered acceptable. This conclusion diverges from that obtained by some studies performed in other countries like the U.S. (Francis et al., 2000, Penman and Sougiannis, 1998, and Courteau et al., 2000).

Keywords: discounted dividend model; residual earnings model; discounted cash flow model (search for similar items in EconPapers)
JEL-codes: M1 M4 (search for similar items in EconPapers)
Date: 2013-02-07
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2013/Volume33/EB-13-V33-I1-P30.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-13-00010

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().