Centre for Discrete and Applicable Mathematics
	CDAM Research Report, LSE-CDAM-2001-12 December 2001

Abstract

In this research we develop an alternative to the Feltham Ohlson investment valuation model. While the Feltham Ohlson model has no transparent role for management, in contrast, in our model management need to make optimal investment or divestment decisions on a period by period basis. We establish the functional relationship between accounting reports and optimal investment decisions. Our model provides both an alternative rationale for published accounting numbers having information content and an alternative framework for specifications of empirical testing of the value relevance of accounting data.

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