An empirical examination of the Ohlson (1995) model

G Swartz and M Negash

South African Journal of Accounting Research, 2006, vol. 20, issue 1, 67-82

Abstract: This paper examines the Ohlson (1995) model and documents its validity in explaining share prices using data for 129 firms continuously listed on the Johannesburg Securities Exchange (JSE hereafter), over a twelve year period. More specifically, cross-sectional multiple regressions and panel data least squares procedures are used to examine whether accrual accounting information and a residual income model are useful in explaining variations in year-end share prices. The cross-sectional results indicate that the Ohlson (1995) model does not establish a significant relationship between year-end share prices and accrual accounting information. However, the panel data least square model resulted in significant and positive relationships between year-end share prices and abnormal earnings, abnormal cash dividends and book value of assets.

Date: 2006
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DOI: 10.1080/10291954.2006.11435122

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