Valuation of salmon farming companies

ABSTRACT

Financial statement information is important for evaluating a firm’s performance, and for forecasting its future cash flows. This paper studies the relationship between financial accounting information and market valuation for publicly listed salmon farming companies. Of special interest is the impact on market valuation, of a requirement for salmon farmers to disclose the effect on their financial numbers of the fair-value adjustment of biomass. The results suggest that the fair-value adjustment results in higher volatility of profits, and lower value relevance for investors.

KEYWORDS:

• Atlantic salmon production
• valuation
• market capitalization
• value-relevance
• stock markets
• share prices
• profitability
• financial performance

Acknowledgments

The author wishes to thank Frank Asche, Atle Øglend, Kristin Roll, and Ragnar Tveterås at the University of Stavanger for helpful discussions.

Notes

There are some studies examining financial statement information from salmon farmers in different contexts. Asche and Sikveland (2015) investigate the determinants of salmon farmers’ operating profits, and Misund (2016b) examines the use of accounting information for predicting corporate failure in the Norwegian salmon industry.

Hydro ASA purchased the salmon farmer MOWI in 1969.

EBITDA is an abbreviation for earnings before interest, taxes, depreciation, and amortization, while EBIT stands for earnings before interest, and taxes.

We thank an anonymous reviewer for making this suggestion.