Please help in confirming this statement…Book value does not represent investors expectation about the future of the firm, andnthus book value maximisation effort by the management will not reflect on the market value of the firm’s equity. Please, I need someone to justify this statement. Thank you.
BV is category based on accounting and/or management assessment which should be based on financial reporting standards and accounting principles. I cannot prove that the category is completely devoid of influence expectations of shareholders as management seeks to increase the wealth of shareholders, and is inclined to make such assessments so indirectly it could be under the “preassure” of investors expectations.
Well, that is not correct. Book value maximisation effort by the management will reflect on the future market value of the firm’s equity.
Thank you, but I have in my note that book value maximisation effort by management will notnrefkect on market value of the firm’s equity. I think I got this from schweser note. But thanks for the clear up, cos my thought is same as yoiurs.
Well. I cannot agree with this attitude because market valuation and book value are not isolated things, it is depend one on another. What about f.ex.revaluation under IFRS when certain asset classes can be revalued to market value?
Also under current or estimated market conditions management makes decissions about evaluation asset class in the balance sheet especially financial assets. There are also decissions about provisions and accruals based on market estimates.
Is there any further explanations of such opinion?