Are value losses relevant in the context of U.S. net firms?

摘要

The purpose of this research is to analyse the positive loss-earnings relation in the context of U.S. net firms. This topic earns special relevance with the emergence of the Internet sector.;We focus on the period between 1996 and 2003. In order to identify the net firms, we collected information from ISDEX -- Internet Stock List. With the goal to control the survivor bias effect, we obtain information about net firms from the Morgan & Stanley reports. We also selected a match sample from NASDAQ, with close IPO dates to those of the net firms. We assume that the negative relation observed in the U.S. net firms, is due the growth opportunities bias. This hypothesis is in line with the Ohlson (1995) and the Feltham and Ohlson (1995) models, who regard current expenses such as R&D and advertising as generating the potential for future growth. Accounting measurements may be misleading, as the GAAP prevailing in the U.S. treat theses items as expenses. By contrast, capital markets seem to give a strong value to firms undertaking such investments.;The Ohlson model was re-specified as a function of current earnings and lagged book value, and incorporated the Fama and MacBeth (1973) methodology, in order to analyse if the market prices differently the value drivers of theses firms as the Internet sector/net firms matures. The results are significant and consistent with: (i) investors look beyond aggregate earnings; (ii) investors value certain components of losses (R&D and advertising expenditures) positively; (iii) the variable book value of equity conveys information for funding available to continue investments in loss firms and (iv) since the nineties we assist to a change in life cycle: the new firms tend to be small, operate in high tech sectors and report losses for long periods.;This research makes a set of contribution to the literature: (i) some firms' losses may not be associated with value destruction; (ii) we challenge the traditional view that losses convey little information content, specially when they are associated to the implementation of growth opportunities; (iii) losses are not homogenous across losses firms, consequently treating losses homogeneously can lead to incomplete or incorrect inferences in empirical research and (iv) distressed firms, specially high tech firms tend to restructure through mergers and acquisitions, curbing the incidence of bankruptcy.;Key Words. equity valuation, net firms, conservatism accounting, intangible assets, start-up firms, growth opportunities.;JEL Classification. G31, M41.