Course Readings:

Items marked with a (*) on the following list will be covered in some detail in session. Other readings listed here serve as background material and will be referred to in passing.


Part I: Financial Ratios


*Penman.2013. Financial Statement Analysis and Security Valuation. Chapter 17: Creating Accounting

Value and Economic Value, Mc-Graw Hill Publishers.


Part II: Accounting Rates of Return


*Fisher and McGowan. 1983. On the Misuse of Accounting Rates of Return to Infer Monopoly Profits.

American Economic Review, 73(1), 82-97.


*Danielson and Press. 2003. Accounting Returns Revisited: Evidence of their Usefulness in Estimating

Economic Returns. Review of Accounting Studies, 8(4), 493-530.


*Rajan, Reichelstein and Soliman. 2007. Conservatism, Growth and Return on Investment. Review

of Accounting Studies, 12, 323-323.


Penman and Zhang. 2013. “Book Rate of Return, Risk, and the Information Conveyed by Conservative Accounting”. Working paper, Columbia University


Part III: Capacity Investments and Financial Ratios


Fisher.1987. On the Misuse of the Profit-Sales Ratio to Infer Monopoly Power. RAND Journal of Economics, 18(3), 384-396.


*Rogerson. 2008. Intertemporal Cost Allocation and Investment Incentives. Journal of Political Economy, 116(5), 931-950.


*Rajan and Reichelstein. 2009. Depreciation Rules and the Relation between Marginal and Historical Cost. Journal of Accounting Research, 47(3), 823-865.


Nezlobin. 2012. Accrual Accounting, Informational Sufficiency and Equity Valuation. Journal of Accounting Research, 50(1), 233-273.


*Nezlobin, Rajan and Reichelstein. 2012. Dynanmics of Rate-of-Return Regulation. Management Science, 58(5), 980-995.


Part IV: The Market-to-Book and Price-to-Earnings Ratios


*Ohlson and Juettner-Nauroth. 2005. Expected EPS and EPS Growth as Determinants of Value. Review of Accounting Studies. 10(2-3), 367-378.


Megna and Klock. 1993. The Impact of Intangible Capital on Tobin’s q. American Economic Review. 83(2) 265-269.


*McNichols, Rajan and Reichelstein. 2014. Conservatism Correction for the Market-to-Book Ratio and Tobin’s q. Review of Accounting Studies, published online in 2014.


*Nezlobin, Rajan and Reichelstein. 2014. Capital Investments and Financial Ratio Analysis. Working Paper, Stanford University.