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Author(s): |
Zhengxuan Wu, School of Economics and Management, Beijing Jiaotong University, BJTU, Beijing, China
Yongsheng Jiang, College of Science, Beijing Jiaotong University, BJTU, Beijing, China
Zhuodan Zhu, School of Economics and Management, Beijing Jiaotong University, BJTU, Beijing, China |
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Abstract: |
This paper aims to compare the residual income and the discounted cash flow approaches on financial firm valuation. First, this paper uses the financial data of all Chinese listed financial companies to construct two indexes that reflect the RI and DCF approaches. Second, the paper examines the relationship between the stock price and the residual income, the free cash flow of equity respectively, using OLS regressions. Empirical results show that the RI and DCF approaches are somehow useful for financial firm estimates. Moreover, the RI approach yields more accurate, which is consistent with the prior results.
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