Effectiveness of corporate finance valuation methods: Piotroski score in an Ohlson model: the case of Mexico


  • Rocío Durán Vázquez Head of Finance and Accounting Department, Universidad de las Americas Puebla Puebla, San Andres Cholula, Mexico
  • Arturo Lorenzo Valdés Universidad de las Americas Puebla, Puebla, San Andres Cholula, Mexico
  • Claudia E Castillo-Ramírez Universidad de las Americas Puebla, Puebla, San Andres Cholula, Mexico


Financial markets, Piotroski score, Ohlson model, Dynamic panel of econometric estimation


This study applied the Piotroski score for 63 selected companies of Mexico, for the period 2005 to 2011. The Piotroski score provides an evaluation on the historical financial performance of a company, with the evaluation of nine financial analysis ratios or criteria. We decided to add this score to the Ohlson Model (which was already tested in previous studies). It was found that the Piotroski score showed statistically significant results in the levels and differences variables. Asymmetric signs were also found in the Piotroski-score variables (levels and lagged), both of them are consistent according to the behavior of the Mexican market. The data were analyzed under a dynamic panel basis, with fixed effects, and the Sargan statistic for this analysis was fulfilled.

DOI: http://dx.doi.org/10.1016/j.jefas.2014.04.003


Download data is not yet available.


Abarbanell, J. S., & Bushee, B. J. (1997). Fundamental analysis, future earnings and stock prices. Journal of Accounting Research, 35(1), 1–24.

Anderson, T. W., & Hsiao, C. (1981). Formulation and estimation of dynamic models using panel data. Journal of Econometrics, 18, 47–82.

Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Review of Economic Studies, 58, 277–297.

Bushman, R. M., Piotroski, J. D., & Smith, A. J. (2011). Capital allocation and timely accounting recognition of economic losses. Journal of Business Finance and Accounting, 28(1-2), 1–33.

Cheng-Few, L., Wei-Kang, S., & Hong-Yi, C. (2010). Technical, fundamental, and combined information for separating winners from losers. Available at http://ssrn.com/abstract=1590460

Collins, D. W., Maydew, E. L., & Weiss, I. S. (1997). Changes in the value-relevance of earnings and book values over the past forty years. Journal of Accounting and Economics, 24(1), 39–67.

Daniel, K., Hirshleifer, D., & Subrahmanyam, A. (1998). Investor psychology and security market under and over reactions. Journal of Finance, 53, 1839–1885.

Dorantes, C. A. (2013). The relevance of using accounting fundamentals in the mexican stock market. Journal of Economics, Finance and Administrative Science, 18(Special Issue), 2–10.

Duran, R., Lorenzo, A., & Valencia, H. (2007). Value relevance of the Ohlson model with Mexican data. Revista de Contaduria y Administracion, 1(223, UNAM), 33–52.

Duran, R., Lorenzo, A., & San Martin, J. M.(2012). Relevance of Discretionary Accruals Information (DAI) in Ohlson model: the case of Mexico, Journal of Entrepreneurship. Management and Innovation, 8, 22–34.

Fama, E., & French, K. (1992). The cross-section of expected stock returns. Journal of Finance, 47(June), 427–465.

Gordon, M. J. (1962). The investment, financing, and valuation of the corporation, Irwin, Homewood, Illinois.

Graham, B., & Dodd, D. (1996). Security analysis: The Classic 1934 Edition. New York, NY: McGraw-Hill.

Hong, H., Lim, T., & Stein, J. (2000). Bad news travel slowly: Size, analyst coverage, and the profitability of momentum strategies. Journal of Finance, 55(February), 265–296.

Jegadeesh, N., & Titman, S. (1993). Returns to buying winners and selling losers: Implications for stock market efficiency. Journal of Finance, 48, 65–91.

Kaplan, R., & Ruback, R. (1995). The valuation of cash flow forecasts: an empirical analysis. Journal of Finance, 50(4), 1059–1093.

Lakonishok, J., Shleifer, A., & Vishny, R.(1994). Contrarian investment, extrapolation, and risk. Journal of Finance, 44(December), 1541–1578.

Lev, B. R., & Thiagarajan, S. R. (1993). Fundamental information analysis. Journal of Accounting Research, 31(2), 190–215.

Liu, D., Nissim, D., & Thomas, J. (2001). Equity valuation using multiples. Journal of Accounting Research, 40(1), 135–172.

Lorenzo, A., & Duran, R. (2010). Ohlson model by panel co-integration with Mexican data. Revista de Contaduria y Administracion, 1(232, UNAM, septiembrediciembre), 131–142.

Mohanram, P. S. (2005). Separating winners from losers among low book-to-market stocks using financial statement analysis. Review of Accounting Studies, 10(2-3), 133–170.

Martinez, P., Prior, D., & Rialp, J.(2012). The price of stocks in LatinAmerican financial markets: An empirical application of the Ohlson model. Global conference on business and finance proceedings, 7, 96–100.

Ohlson, J. A. (1995). Earnings, books values and dividends in equity valuation. Contemporary Accounting Research, 11(2), 661–687.

Ou, J. A., & Penman, S. H. (1989). Accounting measurement, price-earnings ratio, and the information content of security prices. Journal of Accounting Research, 27(3),111–144.

Piotroski, J. D.(2000).Value investing: The use of historical financial statementinformation to separate winners from losers. Journal of Accounting Research, 38(3), 1–41.

Reza, T., Reza, R., Arach, F., & Mohsen, R. (2008). Separating winners from losers among iranian investment companies during the years 2004 to 2005. International Journal of Economic Perspectives, 2, 12–23.

Rosenberg, B., Reid, K., & Lanstein, R. (1984). Persuasive evidence of market inefficiency. Journal of Portfolio Management, 11, 9–17




How to Cite

Durán Vázquez, R., Lorenzo Valdés, A. ., & Castillo-Ramírez, C. E. . (2014). Effectiveness of corporate finance valuation methods: Piotroski score in an Ohlson model: the case of Mexico. Journal of Economics, Finance and Administrative Science, 19(37), 104–107. Retrieved from https://revistas.esan.edu.pe/index.php/jefas/article/view/187