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Business valuation through the Ohlson model: Evidence from the advanced markets of Europe

Vol. 25, Iss. 5, MAY 2019

Received: 12 March 2019

Received in revised form: 26 March 2019

Accepted: 9 April 2019

Available online: 30 May 2019

Subject Heading: BUSINESS VALUE

JEL Classification: G12, G23, G32

Pages: 1205–1226

Khassanov A.B. National Research University Higher School of Economics, Moscow, Russian Federation

Subject The article studies the Ohlson model as an alternative method to explain the dynamics of listed companies' quotations in developed economies of Europe.
Objectives The research constitutes the comparative analysis of the Ohlson model's capability to measure business value in developed economies of Europe. The novelty of the research is a pioneering empirical study into the significance of the Ohlson model with respect to several developed markets of Europe.
Methods Empirical tests are conducted by analyzing the panel data, comparing the assessment based on the pooled regression, deterministic effect model and random effect model for seven consecutive years.
Results Empirical results prove the validity of the Ohlson model for developed markets of Europe. The deterministic effect model had the most appropriate specification. Quotations for the third month proved to be the most suitable for the general sample of developed European markets. As for France and Italy, data for the forth month demonstrate the closest correlation with quotations and explanatory variables. Quotation trends are homologous with changes in the carrying amount, abnormal profit and other information metric.
Conclusions and Relevance I conclude that the Ohlson model can properly explain the dynamics of listed companies' quotations in developed European markets and markets of the United Kingdom, France and Italy. The findings are comparable with conclusions of those articles which focus on developed markets of North America and Asia.

Keywords: Ohlson model, business valuation, deterministic effects, developed markets


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