The Ohlson Model: Contribution to Valuation Theory, Limitations, and Empirical Applications

Kin lo, Thomas Lys

Research output: Contribution to journalReview articlepeer-review

145 Scopus citations


The work of Ohlson (1995) and Feltham and Ohlson (1995) had a profound impact on accounting research in the 1990s. In this paper, we first discuss this valuation framework, identify its key features, and put it in the context of prior valuation models. We then review the numerous empirical studies that are based on these models. We find that most of these studies apply a residual income valuation model without the information dynamics that are the key feature of the Feltham and Ohlson framework. We find that few studies have adequately evaluated the empirical validity of this framework. Moreover, the limited evidence on the validity of this valuation approach is mixed. We conclude that there are many opportunities to refine the theoretical framework and to test its empirical validity. Consequently, the praise many empiricists have given the models is premature.

Original languageEnglish (US)
Pages (from-to)337-367
Number of pages31
JournalJournal of Accounting, Auditing & Finance
Issue number3
StatePublished - Jul 2000

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics, Econometrics and Finance (miscellaneous)


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