The informativeness of embedded value reporting to stock price
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AbstractThis paper examines the informativeness of embedded value reporting to stock price by investigating the cross-sectional variations in life insurers’ price to embedded value ratios. By conducting variance decomposition analysis on a dataset provided by Morgan Stanley, we find that 15 percent (40 percent) of the difference between embedded value and stock price can be explained by growth opportunities and future stock returns in the short (long) run. One-third and two-thirds of the unexplained variation are attributed to firm- and country-specific factors, respectively. The above findings provide investors with a better understanding of the value relevance of embedded value reporting.
Acceptance Date10/03/2021
All Author(s) ListDerrick W. H. Fung, David Jou, Ai Ju Shao, Jason J. H. Yeh
Journal nameAccounting and Finance
Year2021
PublisherWiley
ISSN0810-5391
eISSN1467-629X
LanguagesEnglish-United Kingdom
Keywordsembedded value accounting, Price to embedded value ratio, Variance decomposition, Informativeness, Insurer valuation

Last updated on 2021-28-11 at 00:21