会计系2019双周论坛第二十五讲

主 题：Stock-based Compensation, Financial Analysts, and Equity Overvaluation

主讲人: 赵武阳（德克萨斯大学奥斯汀分校）

协调人: 钟覃琳、高靖宇

时 间：2019-12-25 10:00

地 点：明德商学楼1007室

语 言：中文

Abstract：

Stock-based compensation (SBC) reduces the value of shareholder equity, ceteris paribus, and is a significant and growing expense for many firms. Despite its valuation implications and its growing importance, anecdotal evidence suggests that market participants ignore SBC in valuation. We first find that firms with higher SBC exhibit both higher valuation ratios and lower returns, suggesting overvaluation. In particular, such pattern becomes stronger for firms with larger analyst coverage, implying that the sell-side optimism is an important driver of the overvaluation. We then examine how financial analysts treat SBC in their valuation models. We find that analysts exclude SBC in their street earnings forecasts, and provide more optimistically-biased target prices for firms with higher SBC. A hand-collected sample of analyst reports indicates that analysts who ignore SBC in valuation derive optimistically-biased price targets, whereas analysts who treat SBC as an expense are unbiased on average. Together, our evidence indicates that market participants’ failure to account for stock-based compensation as an expense leads to the overvaluation of equity.

Shot Biography：

Wuyang Zhao is an assistant professor in Accounting at the McCombs School of Business, University of Texas at Austin, where he teaches Financial Statement Analysis to both graduate and undergraduate students. He received his PhD from University of Toronto in 2017. Prior to studying in Canada, he received his Bachelor and PhD degrees at Fudan University. He is primarily interested in the roles of short-sellers and financial analysts in capital markets, particularly on issues that are relevant to practice. His research has been published on top accounting journals such as Journal of Accounting and Economics and Review of Accounting Studies, and quoted by mainstream media such as New York Times and Reuters. He also reviews articles for journals such as Management Science, The Accounting Review, and Contemporary Accounting Research.