Corporate Finance: Valuation最新文献

{"title":"Herfindahl Revisited","authors":"Tatenda Pasipanodya, A. Knott","doi":"10.2139/ssrn.3762836","DOIUrl":"https://doi.org/10.2139/ssrn.3762836","url":null,"abstract":"The Herfindahl-Hirschman Index (HHI) is one of the more commonly used measures in the Strategy and Economics literatures. While its principal uses are measuring market concentration or firm diversification, it has been extended beyond that. One concern with the measure is that an infinite set of distributions can have the same HHI. We assess whether that affects inferences. To do so, we replicate a prior study which employs HHI to test the impact of geographic diversification on firm value. We find that results with HHI are not robust across samples. We further find that decomposing HHI into its count and shape components reveals greater insights. In particular, we find that firm value increases in the number of units, and the similarity across them.","PeriodicalId":127551,"journal":{"name":"Corporate Finance: Valuation","volume":"38 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-01-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121891977","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Exploring the Link between Corporate Reputation with Sustainability Leadership and Market Valuation: A Comparative Analysis of Award and Non-Award Companies in PSX","authors":"Rimsha Naz, D. Siddiqui","doi":"10.2139/ssrn.3756981","DOIUrl":"https://doi.org/10.2139/ssrn.3756981","url":null,"abstract":"This literature investigated the impact of corporate reputation on companies’ performance and their market valuation in the Pakistan stock market. We attempted to explore whether companies with a high reputation for sustainability also perform better in the Pakistan stock market. Verifying signaling theory and asset-based theories on the Pakistani market, we explained why associations signal their promise to practicality to influence the outer point of view on reputation. A company's standing for being focused on supportability is a theoretical asset that can expand the estimation of an association's normal cash flows or potentially lessen the inconstancy of its cash flows. For finding out the companies with a reputation with sustainability, we used the PSX criteria of the award list. Data was taken from 2014 to 2018 (five years) from the award list announced by Pakistan stock exchange limited. We classify a company as an award company if it continuously got included in the PSX award list in a specified period of four out of five times. Similarly, a non-award company was classified as an accompanying with the same market capitalization as Award Company but not included in the list. In this way, 12 awards and 24 non-award companies were shortlisted. We also include 12 non-award companies of the same sector and market capitalization for sector analysis between reputation and non-reputation. Comparative analysis was carried out through 1-way ANOVA and factor affecting and market valuation of the two groups were explored using regression analysis. These factors included net income (NI), book value of equity (BV), Size, ROE, ROA, and Leverage (LEV) represented by debt ratio. According to expectation, our results of t-test suggested that the mean of all variables for award and non-award companies are significantly different and the mean of award companies are higher than their counter part. One way Anova consequences of sectorial examination demonstrated that concerning net gain, there is huge contrast between the methods for trustworthy organizations and non-respectable organizations in seven out of nine areas. Regression Analysis prove our equation that independent variable has significant impact on dependent variable. Our findings showed that the overall firms with incredible sustainability reputation and managed to name on award list of our sample year has greater valuation by the market when stood out from their counterparty (non-award companies). Hence, our results imply that organizations have to focus on their reputation for corporate sustainability which in turn improve their financial position and enhance their market valuation.","PeriodicalId":127551,"journal":{"name":"Corporate Finance: Valuation","volume":"75 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-12-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116179834","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Valuing Private Equity Investments Strip by Strip","authors":"Arpita Gupta","doi":"10.2139/ssrn.3466853","DOIUrl":"https://doi.org/10.2139/ssrn.3466853","url":null,"abstract":"We propose a new valuation method for private equity investments. It first constructs a cash-flow replicating portfolio using cash-flows on various listed equity and fixed income instruments (strips). It then values the listed strips using a flexible asset pricing model that accurately captures the systematic risk in bonds of different maturities and a broad cross-section of equity factors. The method delivers a risk-adjusted profit on each PE investment and a time series for the expected return on each PE fund category. It avoids using realized discount rates and has good small-sample properties. We apply the method to the universe of PE funds. Under our more comprehensive risk model, we find negative risk-adjusted profits for the average fund in most PE categories. Substantial cross-sectional variation and persistence in performance suggests some funds outperform. Expected returns and risk-adjusted profit decline in the later part of the sample.","PeriodicalId":127551,"journal":{"name":"Corporate Finance: Valuation","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-12-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114256497","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Acquisition for Innovations? M&A Intensity and Intra-Firm R&D Reallocations","authors":"Shuxun Wang, Kai Wu, Seiwai Lai","doi":"10.2139/ssrn.3472772","DOIUrl":"https://doi.org/10.2139/ssrn.3472772","url":null,"abstract":"We investigate how M&A activities are used to allocate R&D resources within firm boundaries. We find that Chinese listed firms exhibit strong intra-firm R&D reallocation behaviors following M&A activities from 2007 to 2017. Specifically, they shift innovation activities to subsidiary firms. The intra-firm R&D reallocation concentrates on cash-paid, restructuring, and related-party deals. In addition, the intra-firm R&D reallocation behaviors are visible in firms with low financial constraints, high product market competition, and low productivity. The intra-firm R&D reallocation is value-enhancing for listed firms in general. Our findings highlight the intra-firm R&D reallocation as an effective innovation strategy.","PeriodicalId":127551,"journal":{"name":"Corporate Finance: Valuation","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-12-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129501400","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"On the Diversification of Fixed Income Assets","authors":"Olivier Le Courtois","doi":"10.2139/ssrn.3740580","DOIUrl":"https://doi.org/10.2139/ssrn.3740580","url":null,"abstract":"This article introduces a new approach for dealing with the diversification/concentration risk of fixed income assets. Because Government bonds, corporate bonds, and mortgage securities constitute most of the assets of insurance companies in most countries, it is important to be able to determine the number of lines/issuers of such assets, not only for portfolio management, but also for risk management purposes. The approach that we introduce allows us to show the dependence of the critical number of lines of fixed income assets on the main interest rate risk and credit risk drivers. Specifically, we examine the importance of volatility risk, force of mean reversion, default risk, recovery risk, and default dependence risk on the critical number of fixed income assets in which an insurance business should invest.","PeriodicalId":127551,"journal":{"name":"Corporate Finance: Valuation","volume":"23 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131732373","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Is it Time to Terminate the Traditional Terminal Value?","authors":"Bradford Cornell, Richard Gerger","doi":"10.2139/ssrn.3739020","DOIUrl":"https://doi.org/10.2139/ssrn.3739020","url":null,"abstract":"All corporate valuation models rely on very long forecasts of free cash flows. The only question is whether those forecasts are accounted for explicitly by using an extended valuation model or implicitly in an estimate of the terminal value after an explicit short-term forecast period of five to ten years. Given current computing technology, there are good reasons to use projections running out multiple decades. Doing so gives a clearer picture of the long-run issues that affect a company's value. Of course, developing very long-term forecasts is difficult and may be considered speculative, but the difficulty and speculation are not removed by assuming that at a horizon of five or ten years the firm enters steady state and applying a constant growth terminal value model. A better approach in many circumstances may be to explicitly take account of the need for very long-term forecasts, raising the question: “Is it time to terminate the traditional terminal value?”","PeriodicalId":127551,"journal":{"name":"Corporate Finance: Valuation","volume":"52 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124362193","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Why Do Companies Hold Inventory? Evidence from the COVID-19 Crisis","authors":"O. Dodd, Shushu Liao","doi":"10.2139/ssrn.3739570","DOIUrl":"https://doi.org/10.2139/ssrn.3739570","url":null,"abstract":"We study the role of inventory in corporate financial management using the exogenous shocks to consumer demand, commodity prices, and global supply chains triggered by the COVID-19 pandemic. The sharp, unexpected drop in consumer demand and commodity prices increases the costs of holding inventory. On the flip side, inventory holdings provide a buffer against supply chain disruptions. Empirically, we find that U.S. firms with higher inventory levels experience a more negative stock market response to COVID-19. We identify the causal effects of inventory by controlling for unobserved firm heterogeneity, various firm characteristics, and endogeneity. The negative impact of inventory is more profound for firms with greater exposure to the slump in consumer demand and commodity prices. For firms that experience supply chain disruptions during COVID-19, inventory holdings have compensating effects. Financially constrained firms suffer higher costs of holding inventory during the crisis. We reconfirm that inventory carries significant costs during demand shocks using two other events – the 9/11 terrorist attacks and the global financial crisis.","PeriodicalId":127551,"journal":{"name":"Corporate Finance: Valuation","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131005881","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Do Digital Technology Firms Earn Excess Profits? An Alternative Perspective","authors":"Shivaram Rajgopal, Anup Srivastava, Rong Zhao","doi":"10.2139/ssrn.3739037","DOIUrl":"https://doi.org/10.2139/ssrn.3739037","url":null,"abstract":"Despite regulators’ allegations that digital technology giants misuse their market power to earn abnormal profits, there is a dearth of systematic work on (i) whether digital-tech firms in general, and tech giants in particular, earn excess profits; or (ii) whether their abnormal profitability, if any, is due to market power. We use two alternative measures of economic profitability in addition to accounting rate of return (ARR): internal rate of return (IRR), which equates current investments to their long-term payback, and return on invested capital (ROIC), whose numerator (profits) and denominator (invested capital) are adjusted for capitalized intangibles. Inferences based on IRRs differ from those based on ARRs and ROICs. IRRs show that the digital-tech sector is now the best-performing sector and its gap between profitability and cost of capital has increased over time. We are unable to separate the contribution of market power and innovation to digital tech’s high IRRs.","PeriodicalId":127551,"journal":{"name":"Corporate Finance: Valuation","volume":"148 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121037143","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Management Practices and Mergers and Acquisitions","authors":"John (Jianqiu) Bai, Wang Jin, Matthew Serfling","doi":"10.2139/ssrn.3208988","DOIUrl":"https://doi.org/10.2139/ssrn.3208988","url":null,"abstract":"Using a novel data set of establishment-level management practices from the U.S. Census Bureau, we show that firms with more specific, formal, frequent, or explicit (i.e., “structured”) management practices tend to acquire establishments with less structured management practices and, following the acquisition, adopt more structured practices at the target establishments. These changes are larger when acquirers have a greater incentive and ability to make changes and are also associated with improvements in establishment performance. Overall, our findings suggest that the adoption of more structured management practices constitutes an important source of value creation in mergers and acquisitions. This paper was accepted by Tomasz Piskorski, finance.","PeriodicalId":127551,"journal":{"name":"Corporate Finance: Valuation","volume":"46 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132740843","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"The Nonfinancial Value of Financial Firms","authors":"Yu Shi","doi":"10.2139/ssrn.3733889","DOIUrl":"https://doi.org/10.2139/ssrn.3733889","url":null,"abstract":"I propose that the nonfinancial component of financial firms' assets, in particular the growth opportunities associated with business operations, drives most of the variation in their equity valuation. I document this fact for a large class of intermediaries: life insurance companies. In particular, I decompose insurers' market equity returns into net financial asset returns and net business asset returns and show that these two components have very different risk exposures and are negatively correlated outside of the 2008-2009 financial crisis. The variation in life insurers' net business asset returns drives 81% of the aggregate time-series variation and 100% of the cross-sectional variation in their market equity returns. For this reason, the current intense regulation on life insurers' net financial assets may be insufficient as a great deal of risk is derived from their net business assets, which are comparatively under-regulated.","PeriodicalId":127551,"journal":{"name":"Corporate Finance: Valuation","volume":"53 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130346664","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}