Does Firm Value Move Too Much to be Justified by Subsequent Changes in Cash Flow?

Loading...
Thumbnail Image
Penn collection
Finance Papers
Degree type
Discipline
Subject
Finance
Finance and Financial Management
Funder
Grant number
License
Copyright date
Distributor
Related resources
Author
Larrain, Borja
Yogo, Motohiro
Contributor
Abstract

The appropriate measure of cash flow for valuing corporate assets is net payout, which is the sum of dividends, interest, and net repurchases of equity and debt. Variation in net payout yield, the ratio of net payout to asset value, is mostly driven by movements in expected cash flow growth, instead of movements in discount rates. Net payout yield is less persistent than dividend yield and implies much smaller variation in long-horizon discount rates. Therefore, movements in the value of corporate assets can be justified by changes in expected future cash flow.

Advisor
Date Range for Data Collection (Start Date)
Date Range for Data Collection (End Date)
Digital Object Identifier
Series name and number
Publication date
2008-01-01
Journal title
Journal of Financial Economics
Volume number
Issue number
Publisher
Publisher DOI
Journal Issue
Comments
Recommended citation
Collection