Larrain, Borja; Yogo, Motohiro - 2007
Firm Value Move Too Much to be Justified by
Subsequent Changes in Cash Flow?
Borja Larrain and Motohiro Yogo
Abstract:
Movements in the value of corporate assets are justified by changes in expected future cash …
flow. The appropriate measure of cash flow for valuing assets is net payout, which is the sum of
dividends …, interest, and net repurchases of equity and debt. When discount rates are low and
equity issuance is high, expected cash‐flow growth is low because firms repurchase debt to
offset equity …