"The Pricing of Mandated DCF Valuation Disclosures: Evidence from Royalty Trusts"
Abstract [pdf]:
"We identify a unique setting in which a sample of firms are required to disclose discounted free cash flow (DCF) valuations for their own equity. ASC 932 (formerly SFAS No. 69) has mandated DCF valuations for proved oil and gas reserves since 1982, and these reserves constitute the primary assets of oil and gas royalty trusts. For a comprehensive sample of these royalty trusts, we find that (i) mandated DCF valuations are incrementally value relevant over historical cost accounting variables; (ii) stock prices initially underreact to information in mandatory DCF valuations; and (iii) media articles bringing attention to discrepancies between price and DCF valuation serve as significant catalysts for stock price correction."
No comments:
Post a Comment