The Possibility of Applying the Profitability Multiplier Model and the Lerner and Carlton Model to Measure the Fair Value of Private Commercial Bank Shares Listed on the Iraqi Stock Exchange for the Period (2014-2019)
1Nouha Ghanem Abboud, 2Alaa Ali Rahm
1,2Lecturer in Department of Accounting, Faculty of Economics, Mazaya University College, Iraq/ Thi-Qar/ Alzaytoon St. 246/6
https://doi.org/10.47191/jefms/v7-i9-29ABSTRACT:
The study aimed to measure the fair value of private commercial bank shares listed on the Iraqi Stock Exchange using the profitability multiplier model and the Lerner and Carlton model, and to test the differences between the fair value of shares measured by each model and their market values to determine whether the market prices of shares reflect their fair value. Then compare between the fair value measurements models to choose the best model based on the results of the difference tests. The fair values were calculated according to these two models based on the annual data of the 6 banks in the study sample during the period (2014 - 2019), and differences tests were relied upon to test whether there were significant differences or not between the fair value estimates according to each model and the market value, so that Finding the best model to measure the fair value of bank shares. The study found that there are no statistically significant differences at the significance level of 0.05 between the market value and the fair value of private commercial banks listed on the Iraqi Stock Exchange according to the profitability multiplier model. While statistically significant differences were found at a significance level of 0.05 between the market value and the fair value of private commercial banks listed on the Iraqi Stock Exchange according to the Lerner and Carlton model, the profitability multiplier model is better than the Lerner and Carlton model in measuring the fair value of the banks’ shares in the study sample.
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