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Resource Margin Accounting: Empirical Results for US Manufacturing Companies 1983-1998

Peter Johnson


In this paper empirical results are presented concerning Resource Margin valuation models previously developed by the author. The research tests the strength of the general linkages between resource margins and valuation measures for a sample of approximately 300 US manufacturing companies between 1983 and 1998. Good explanatory support is found for the use of resource margins. In particular, the resource model developed has greater explanatory power than traditional market-to-book models. In a separate body of analysis, specific time-series valuation models for individual companies are tested, for which the results are poor. For both analyses, supplementary investigations have been carried out into multi-collinearity, and heteroskedasticity for the ordinary least squares models developed. Altogether the results are encouraging, but further work is required to extend the sample of companies, and to develop improved general model specifications to cope with problems of auto-correlation amongst the data for individual companies.

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