Share Prices and Accounting Information
|Unit level:||Level 3|
|Teaching period(s):||Semester 1|
|Offered by||Alliance Manchester Business School|
|Available as a free choice unit?:||N
- BMAN23000 - Foundations of Finance A (Compulsory)
- BMAN23000B - Foundations of Finance B (Compulsory)
Additional RequirementsBMAN23000(A) or (B) is a pre-requisite of BMAN30071.
Pre-requisite course units have to be passed by 40% or above at the first attempt unless a higher percentage is indicated within this course outline. If the pre-requisite unit is defined as a compulsory course unit within your programme of study (Maths with Finance, IBFE, Accounting, BA Econ pathways for example) then progression onto the dependent unit is permitted as long as you have gained the appropriate amount of credit to progress on to the following year of your registered undergraduate programme.
Pre-requisites: BMAN23000(A) or (B) Foundations of Finance
Dependent course units: None
The course aims to increase students' knowledge of accounting-based valuation models. Students will learn how these models are constructed and how the validity of these models can be tested both by logical criticism and by empirical evidence.
Accounting numbers are regarded as being useful in evaluating alternative investments. The module reviews various theoretical models that have been adopted or proposed for calculating a firm's intrinsic value. These valuation models link share prices or returns to various items from the income statement and the balance sheet. Formal valuation models include the Simple Earnings Capitalisation Model, Option-Style Valuation Models and Abnormal Earnings Valuation Models. Valuation Models based on the Abnormal Earnings Valuation Framework are enjoying increasing popularity. The course also introduces the notion of earnings conservatism. Earnings Conservatism is closely linked with Share Price Anticipation of Earnings. Two lectures deal with the phenomenon of 'prices leading earnings'. The course also discusses why informational asymmetries between managers and outsiders can have an impact on the performance of various theoretical models. The final lecture deals with managers' incentive to manipulate accounting earnings and the implications of such manipulations for earnings-based valuation models.
Teaching and learning methods
16 one hour lectures for 9 weeks (workshops and seminars included in lecture slots).
Total study hours: 100 hours split between lectures, classes, reading, self-study and preparation for classes, coursework and examination.
Informal Contact Methods
1. Office Hours
On completion of this course unit, successful students will:
- have a knowledge and understanding of major accounting-based valuation models, including a familiarity with the seminal research papers in the area, and an understanding of the limits of such knowledge;
- have the ability to critically evaluate theories and evidence related to accounting-based valuation models;
- have a knowledge and understanding of the methodology that is employed in order to test these models empirically;
- be able to access relevant journal articles in major US/UK accounting journals and draw on them in critical consideration of arguments;
- be able to use communication and information technology (e.g. spreadsheets and word-processing) in acquiring, analysing and communicating information.
Assessment Further Information
2 hour examination (100%)
For semester 1 only exchange students admitted via the Alliance Manchester Business School International Office that take this course as BMAN30851 the assessment will be an 8 page research report
The course is based - to a large extent - on journal articles. The main journals of interest in this course are:
Journal of Accounting Research (JAR), Accounting Review (AR), Journal of Accounting and Economics (JAE), Review of Accounting Studies (RAS), and - to lesser extent - Journal of Business Finance and Accounting (JBFA) and Accounting and Business Research (ABR).
The first four journals are American journals; the other two journals are from the UK.
Some parts of the course are covered in the following two textbooks:
Barker, R. (2001), Determining Value: Valuation Models and Financial Statements, Harlow: Financial Times Prentice Hall.
Scott, W. R. (2003), Financial Accounting Theory, 3rd Edition, Toronto: Prentice Hall.
Methods of Feedback to Students
- Informal advice and discussion during a lecture, seminar and workshops.
- Responses to student emails and questions from a member of staff.
- Generic feedback posted on Blackboard regarding overall examination performance.
- Assessment written exam - 2 hours
- Lectures - 16 hours
- Independent study hours - 82 hours