Damodaran
Journal of Finance and Accountancy rnal
An examination of future firm performance and fundamental analysis
Chris Luchs Ball State University Suneel Maheshwari Marshall University Mark Myring Ball State University ABSTRACT undamental The purpose of fundamental analysis is to identify key drivers of firm value. Academic research of fundamental analysis attempts to link fundamental analysis signals (e.g., changes in accounts receivable or research and development) with future returns and earnings. Prior studies using data from the US document significant relationships between fundamental signals and significant earnings and returns (e.g. Abarbanell and Bushee 1997 Lev and Thiagarajan 1993). While the 1997; 1993 relationship between fundamental signals and value is well documented in the US, little research examines this relationship in an international setting. The purpose of this study is to examine the ability of the fundamental signals to explain both future earnings and returns of firms in India. India is quickly becoming one of the largest economies is in the wor . Thus, understanding the world. relationship between financial statement data and firm performance in India is of increasing importance. The results of this study document a significant relation between fundamental signals and future earnings in India. However, the relationship between fundamental signals and returns and earnings differs substantially that the relationship identified by prior studies in the US. Keywords: Fundamental analysis, future earnings, annual returns
An examination of future firm performance, Page 1
Journal of Finance and Accountancy rnal INTRODUCTION Fundamental analysis examines the association of key signals derived from financial statements and either earnings and returns. Academic research examining fundamental signals is sign particularly important as it attempts to show that accounting disclosures other than earnings are useful in predicting firm performance.
An examination of future firm performance and fundamental analysis
Chris Luchs Ball State University Suneel Maheshwari Marshall University Mark Myring Ball State University ABSTRACT undamental The purpose of fundamental analysis is to identify key drivers of firm value. Academic research of fundamental analysis attempts to link fundamental analysis signals (e.g., changes in accounts receivable or research and development) with future returns and earnings. Prior studies using data from the US document significant relationships between fundamental signals and significant earnings and returns (e.g. Abarbanell and Bushee 1997 Lev and Thiagarajan 1993). While the 1997; 1993 relationship between fundamental signals and value is well documented in the US, little research examines this relationship in an international setting. The purpose of this study is to examine the ability of the fundamental signals to explain both future earnings and returns of firms in India. India is quickly becoming one of the largest economies is in the wor . Thus, understanding the world. relationship between financial statement data and firm performance in India is of increasing importance. The results of this study document a significant relation between fundamental signals and future earnings in India. However, the relationship between fundamental signals and returns and earnings differs substantially that the relationship identified by prior studies in the US. Keywords: Fundamental analysis, future earnings, annual returns
An examination of future firm performance, Page 1
Journal of Finance and Accountancy rnal INTRODUCTION Fundamental analysis examines the association of key signals derived from financial statements and either earnings and returns. Academic research examining fundamental signals is sign particularly important as it attempts to show that accounting disclosures other than earnings are useful in predicting firm performance.