Thesis: Effect of Book Value on Market Value

Sample Thesis Paper

The evaluation of the literature indicates that the book value can act as the predictor of the movements in the market values. However the book value is affected by many factors which may also influence the relationship between the book value and the market value. One of the most important aspects of the book value is the items included in its measurement.

The inclusion of intangible assets makes it more relevant but less reliable. The market value is also influenced by many other factors. However the most important factors with regard to its relationship with the book value are the information asymmetry and the application of rationality.  The analysis of previous studies indicates that a majority of them have found a significant relationship between the book value and the market value of companies In all the cases the relationship has been found to be positive. The findings are however not conclusive on the nature of the relationship. The diversity of the techniques used also limits the applicability of the findings in investment decisions. This research will therefore help in describing the nature of the relationship and the factors that are the most important in the relationship. This will help in the improvement of existing knowledge and identification of areas that would need further research.

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