A robust model to estimate a firm’s average economic return

IF 2.9 3区 管理学 Q2 BUSINESS, FINANCE Journal of Contemporary Accounting & Economics Pub Date : 2024-01-04 DOI:10.1016/j.jcae.2023.100400
Morris G. Danielson
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Abstract

Theoretical studies question the ability of financial statement information to provide evidence about a firm’s economic performance, as the mathematical relation between a firm’s accounting and economic returns becomes intractable when economic depreciation is defined endogenously—as a function of the firm’s cash flow stream—and when its internal rate of return (IRR) and investment growth rate have not been constant. This paper derives a new equation, called the average internal rate of return (AIRR) estimation model, in which a firm’s AIRR is estimated as a function of its current-year accounting return, its current-year asset growth rate, a measure of accounting conservatism, and a term that identifies the firm’s historical investment growth rate trend. Because the model allows economic depreciation to be defined exogenously, non-constant returns and growth rates can be aggregated across investment cohorts, allowing a firm’s accounting return to be reconciled to its average economic return. One such exogenous schedule—called competitive market depreciation—is used to illustrate the model’s implications. The AIRR estimation model empowers analysts to identify the direction and magnitude of the potential difference between a firm’s accounting and economic return created by fixed asset depreciation, accounting accruals, and the immediate expensing of intangible assets.

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估算企业平均经济回报的稳健模型
理论研究质疑财务报表信息提供公司经济业绩证据的能力,因为当经济折旧被内生地定义为公司现金流的函数时,当公司的内部收益率(IRR)和投资增长率不是恒定不变时,公司的会计收益和经济收益之间的数学关系就变得难以解决。本文推导出一个新方程,称为平均内部收益率(AIRR)估算模型,其中公司的 AIRR 是由其当年的会计收益率、当年的资产增长率、会计保守程度和一个可识别公司历史投资增长率趋势的项组成的函数。由于该模型允许经济折旧的外生定义,非恒定回报率和增长率可以在不同的投资组群中汇总,从而使公司的会计回报率与其平均经济回报率相一致。我们用一个这样的外生时间表--竞争性市场折旧--来说明模型的意义。AIRR 估算模型使分析师能够确定固定资产折旧、会计权责发生制和无形资产即时费用化所造成的企业会计回报与经济回报之间潜在差异的方向和大小。
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CiteScore
6.00
自引率
3.00%
发文量
24
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