Measuring value creating growth


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Measuring value creating growth

Show simple item record Petersen, Christian en_US Plenborg, Thomas en_US 2009-02-04T10:24:35Z 2009-02-04T10:24:35Z 2007-12-11T00:00:00Z en_US
dc.description.abstract ’Growth’ as a concept is often not very well understood. Growth may be measured in a variety of ways (e.g., growth in turnover, earnings, earnings per share, assets, and shareholders equity). Investors and other capital providers generally find it attractive to invest in ‘growth firms.’ For instance, earnings per share (EPS) figures are widely published and used by investors. An increase in EPS is seen as a signal of improved profitability. Likewise, growth in earnings measures such as EBIT, EBITA, EBITDA etc. seem to indicate that firms are value creating. Our paper discusses if and under what conditions growth in accounting variables (accounting numbers and financial ratios) is value creating. We find that growth in one-periodic earnings measures does not necessarily create wealth for shareholders. Only growth in economic income is value creating. Our analysis also provide evidence that users of accounting information should be aware of the quality of growth and distinguish between growth based on transitory vs. permanent components of earnings. Our analysis finally documents that growth in earnings per share or return on equity caused by share repurchases has no economic significance. en_US
dc.format.extent 22 s. en_US
dc.language eng en_US
dc.relation.ispartofseries Working paper;2007-03 en_US
dc.title Measuring value creating growth en_US
dc.type wp en_US
dc.accessionstatus modt07dec11 nijemo en_US
dc.contributor.corporation Copenhagen Business School. CBS en_US
dc.contributor.department Institut for Regnskab og Revision en_US
dc.contributor.departmentshort RR en_US
dc.contributor.departmentuk Department of Accounting and Auditing en_US
dc.contributor.departmentukshort AA en_US
dc.idnumber x656555857 en_US København en_US
dc.publisher.year 2007 en_US

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