You are here


Financial statement analysis, growth expectations, and equity valuation

Siyi Li, 2003
Faculty Advisor: Stephen Penman


This study develops forecasts of earnings growth using a structured financial statement analysis and compares those forecasts with analysts' growth forecasts and the implied growth expectation in market prices. It takes the perspective that investors buy future earnings, and thus long-term earnings growth expectation is a key determinant of valuation. Companies with better growth prospects can command higher price-to-earnings ratios. Investors face significant uncertainty regarding long-term growth, and financial statement information proves useful in reducing such uncertainty. The proposed financial statement analysis model combines financial statement-based signals about future earnings into a composite indicator of the firm's growth prospects that explains traded P/E ratios. By comparing the financial statement analysis-based earnings growth forecasts with market growth expectations, the study shows that, first, financial analysts have not entirely incorporated the relevant financial statement information into their long-term growth forecasts, and secondly, stock prices appear not to fully reflect such information. This leads to the predictability of stock returns, which could have been exploited by sophisticated financial statement users.

Doctoral Program News

Honigsberg featured in Ideas at Work

The August issue of Ideas at Work features research that doctoral candidate Colleen Honigsberg led in conjunction with Sharon Katz.

Read More about Colleen

Wazlawek featured in Ideas at Work

Abbie Wazlawek's joint research with Professor Daniel Ames is featured in the June 24th, 2014 edition of Ideas at Work

Read More about Abbie

Ethan Rouen featured in Ideas at Work

Ethan Rouen's joint research with Professor Dan Amiram is featured in the May 15th, 2014 edition of Ideas at Work

Read More about Abbie

Rivas Wins Fellowship

The PhD program is proud to congratulate Miguel Duro Rivas, who was awarded the Nasdaq Educational Foundation Doctoral Dissertation Fellowship.

Read More about Miguel

Wong wins Deloitte Fellowship

We are proud to announce that Yu Ting (Forester) Wong is one of the recipients of the 2014 Deloitte Foundation Doctoral Fellowship in Accounting.

Read More About Yu Ting >

The PhD Program Congratulates John Yao

PhD student John Yao was a finalist in the 2013 M&SOM (Manufacturing & Service Operations Management) student paper competition.

Read More About John >

Honigsberg Named Postdoctoral Fellow

The PhD program is proud to congratulate Colleen Honigsberg, who was named the Postdoctoral Fellow in Corporate Governance at the Millstein Center at Columbia Law School in October 2013

Read More about Colleen >


Application Deadlines

Master of Science in Marketing >

For Fall 2015 Entry:
Deadline: January 5th, 2015


Master of Science in Financial Economics

For Fall 2015 Entry:
Deadline: January 5th, 2015


Master of Science in Management Science and Engineering

For Fall 2014 Entry:
Early Decision: Jan 6, 2015
Regular Decision: Feb 15, 2015


Apply Now
Sept 2015

Deadline: 01/05/15

MS Marketing
Deadline: 01/05/15

MS Financial Economics
Deadline: 01/05/15


Check Application Status

Students listening to classroom lecture

Once you've submitted your application, you can login and track your status by using the link below.

Check Status