Pub Date : 2015-11-17DOI: 10.1108/03074350710823827
Pablo Fernandez
This paper shows 10 valuation methods based on equity cash flow; free cash flow; capital cash flow; APV (Adjusted Present Value); business’s risk-adjusted free cash flow and equity cash flow; risk-free rate-adjusted free cash flow and equity cash flow; economic profit; and EVA.
All 10 methods always give the same value. This result is logical, as all the methods analyze the same reality under the same hypotheses; they differ only in the cash flows or parameters taken as the starting point for the valuation.
The disagreements among the various theories of firm valuation arise from the calculation of the value of the tax shields (VTS). The paper shows and analyses 9 different theories on the calculation of the VTS, lists the most important assumptions and valuation equations according to each of these theories, and provides an example in which the VTS of a company with debt of 1,500 goes from zero to 745.
{"title":"Valuing Companies by Cash Flow Discounting: Ten Methods and Nine Theories","authors":"Pablo Fernandez","doi":"10.1108/03074350710823827","DOIUrl":"https://doi.org/10.1108/03074350710823827","url":null,"abstract":"This paper shows 10 valuation methods based on equity cash flow; free cash flow; capital cash flow; APV (Adjusted Present Value); business’s risk-adjusted free cash flow and equity cash flow; risk-free rate-adjusted free cash flow and equity cash flow; economic profit; and EVA.<br><br>All 10 methods always give the same value. This result is logical, as all the methods analyze the same reality under the same hypotheses; they differ only in the cash flows or parameters taken as the starting point for the valuation.<br><br>The disagreements among the various theories of firm valuation arise from the calculation of the value of the tax shields (VTS). The paper shows and analyses 9 different theories on the calculation of the VTS, lists the most important assumptions and valuation equations according to each of these theories, and provides an example in which the VTS of a company with debt of 1,500 goes from zero to 745.","PeriodicalId":126917,"journal":{"name":"European Financial Management Association Meetings (EFMA) (Archive)","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2015-11-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116694752","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}
This paper explores the theoretical and empirical implications of time-varying and unobservable beta. Investors infer factor loadings from the history of returns via the Kalman filter. Due to learning, the history of beta matters. Even though the conditional CAPM holds, standard OLS tests can reject the model if the evolution of investor's expectations is not properly modelled. We use our methodology to explain returns on the twenty-five size and book-to-market sorted portfolios. Our learning version of the conditional CAPM produces pricing errors that are significantly smaller than standard conditional or unconditional CAPM and the model is not rejected by the data.
{"title":"Learning About Beta: Time-Varying Factor Loadings, Expected Returns, and the Conditional CAPM","authors":"T. Adrian, Francesco Franzoni","doi":"10.2139/ssrn.391562","DOIUrl":"https://doi.org/10.2139/ssrn.391562","url":null,"abstract":"This paper explores the theoretical and empirical implications of time-varying and unobservable beta. Investors infer factor loadings from the history of returns via the Kalman filter. Due to learning, the history of beta matters. Even though the conditional CAPM holds, standard OLS tests can reject the model if the evolution of investor's expectations is not properly modelled. We use our methodology to explain returns on the twenty-five size and book-to-market sorted portfolios. Our learning version of the conditional CAPM produces pricing errors that are significantly smaller than standard conditional or unconditional CAPM and the model is not rejected by the data.","PeriodicalId":126917,"journal":{"name":"European Financial Management Association Meetings (EFMA) (Archive)","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2008-10-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122728021","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}
This paper addresses the valuation of firms by cash flow discounting. The first part shows that the four most commonly used discounted cash flow valuation methods (free cash flow discounted at the WACC; cash flow available for equity holders discounted at the required return on the equity flows; capital cash flow discounted at the WACC before taxes; and Adjusted Present Value) always give the same value. This result is logical because all the methods analyse the same reality under the same hypotheses; they differ only in the flows used as the starting point for the valuation. The disagreements in the various theories on the valuation of the firm arise from the calculation of the discounted value of tax shields (DVTS). The paper shows and analyses 7 different theories on the calculation of the DVTS: Modigliani and Miller (1963), Myers (1974), Miller (1977), Miles and Ezzell (1980), Harris and Pringle (1985), Ruback (1995), Damodaran (1994), and Practitioners method. It is shown that Myers' method (1974) gives inconsistent results. When analysing the results given by the different theories, it should be remembered that the DVTS is not actually the present value of the tax saving due to the payment of interested discounted at a certain rate but the difference between two present values: the present value of the taxes paid by the firm with no debt minus the present value of the taxes paid by the company with debt. The risk of the taxes paid by the company with no debt is less than the risk of the taxes paid by the company with debt. The paper also shows the changes that take place in the valuation formulas when the debt's market value does not match its book value.
本文讨论了用现金流折现法对企业进行估值的问题。第一部分介绍了四种最常用的现金流量折现评估方法(按WACC折现的自由现金流量;权益持有人可用现金流量按权益流量要求的回报折现;按WACC贴现的税前资本现金流量;和调整后现值)总是给出相同的值。这个结果是合乎逻辑的，因为所有的方法都在相同的假设下分析相同的现实;它们的不同之处在于用作估值起点的流量。关于企业估值的各种理论的分歧来自于对税收盾贴现价值(DVTS)的计算。本文展示并分析了7种不同的DVTS计算理论:Modigliani and Miller(1963)、Myers(1974)、Miller(1977)、Miles and Ezzell(1980)、Harris and Pringle(1985)、Ruback(1995)、Damodaran(1994)和Practitioners method。Myers的方法(1974)给出了不一致的结果。在分析不同理论给出的结果时，应该记住，DVTS实际上不是由于利息支付以一定比率贴现而节省的税收的现值，而是两个现值之间的差值:无债务公司所支付的税收的现值减去有债务公司所支付的税收的现值。无负债公司纳税的风险小于有负债公司纳税的风险。本文还分析了债券的市场价值与账面价值不匹配时估值公式的变化。
{"title":"Equivalence of the Different Discounted Cash Flow Valuation Methods: Different Alternatives for Determining the Discounted Value of Tax Shields and Their Implications for the Valuation","authors":"Pablo Fernández","doi":"10.2139/ssrn.182308","DOIUrl":"https://doi.org/10.2139/ssrn.182308","url":null,"abstract":"This paper addresses the valuation of firms by cash flow discounting. The first part shows that the four most commonly used discounted cash flow valuation methods (free cash flow discounted at the WACC; cash flow available for equity holders discounted at the required return on the equity flows; capital cash flow discounted at the WACC before taxes; and Adjusted Present Value) always give the same value. This result is logical because all the methods analyse the same reality under the same hypotheses; they differ only in the flows used as the starting point for the valuation. The disagreements in the various theories on the valuation of the firm arise from the calculation of the discounted value of tax shields (DVTS). The paper shows and analyses 7 different theories on the calculation of the DVTS: Modigliani and Miller (1963), Myers (1974), Miller (1977), Miles and Ezzell (1980), Harris and Pringle (1985), Ruback (1995), Damodaran (1994), and Practitioners method. It is shown that Myers' method (1974) gives inconsistent results. When analysing the results given by the different theories, it should be remembered that the DVTS is not actually the present value of the tax saving due to the payment of interested discounted at a certain rate but the difference between two present values: the present value of the taxes paid by the firm with no debt minus the present value of the taxes paid by the company with debt. The risk of the taxes paid by the company with no debt is less than the risk of the taxes paid by the company with debt. The paper also shows the changes that take place in the valuation formulas when the debt's market value does not match its book value.","PeriodicalId":126917,"journal":{"name":"European Financial Management Association Meetings (EFMA) (Archive)","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2007-10-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129464950","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}
Prior research has argued that convertible preferred equity is the optimal form of venture capital finance, based on datasets with up to 213 observations from the U.S., where unique tax biases exist in favour of convertible preferred. This paper introduces a comparable sample of 3083 Canadian corporate and limited partnership venture financing transactions spanning the years 1991-2000. The data indicate a variety of securities are used, and convertible preferred equity has not been the most frequent. Empirical tests offer strong support for the proposition that the mix of financing instruments minimizes the costs arising from a set of agency problems.
{"title":"Capital Structure in Venture Finance","authors":"Douglas J. Cumming","doi":"10.2139/ssrn.218352","DOIUrl":"https://doi.org/10.2139/ssrn.218352","url":null,"abstract":"Prior research has argued that convertible preferred equity is the optimal form of venture capital finance, based on datasets with up to 213 observations from the U.S., where unique tax biases exist in favour of convertible preferred. This paper introduces a comparable sample of 3083 Canadian corporate and limited partnership venture financing transactions spanning the years 1991-2000. The data indicate a variety of securities are used, and convertible preferred equity has not been the most frequent. Empirical tests offer strong support for the proposition that the mix of financing instruments minimizes the costs arising from a set of agency problems.","PeriodicalId":126917,"journal":{"name":"European Financial Management Association Meetings (EFMA) (Archive)","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2005-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124634400","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}
This paper examines the effects of equity ownership by insiders and equity ownership by blockholders and institutions on performance using samples of firms from four countries (United States, United Kingdom, Germany, and Japan). While there are no consistent relationships between insider ownership or blockholder/institutional ownership on performance across the four countries, there are nevertheless significant associations between ownership of these groups and performance within the four countries. Our results may indicate that the effects of insider ownership and/or blockholders/institutions depend very much on local laws or the local business environment. In contrast, the effects of the control factors on performance are much more consistent. Leverage, for example, tends to have a negative effect while capital expenditures and sales growth both generally have a positive effect.
{"title":"The International Evidence on Performance and Equity Ownership by Insiders, Blockholders, and Institutions","authors":"Bruce Seifert, H. Gonenc, Jim Wright","doi":"10.2139/ssrn.314276","DOIUrl":"https://doi.org/10.2139/ssrn.314276","url":null,"abstract":"This paper examines the effects of equity ownership by insiders and equity ownership by blockholders and institutions on performance using samples of firms from four countries (United States, United Kingdom, Germany, and Japan). While there are no consistent relationships between insider ownership or blockholder/institutional ownership on performance across the four countries, there are nevertheless significant associations between ownership of these groups and performance within the four countries. Our results may indicate that the effects of insider ownership and/or blockholders/institutions depend very much on local laws or the local business environment. In contrast, the effects of the control factors on performance are much more consistent. Leverage, for example, tends to have a negative effect while capital expenditures and sales growth both generally have a positive effect.","PeriodicalId":126917,"journal":{"name":"European Financial Management Association Meetings (EFMA) (Archive)","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2005-02-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130638262","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}
One key stylized fact in the empirical option pricing literature is the existence of an implied volatility surface (IVS). The usual approach consists of fitting a linear model linking the implied volatility to the time to maturity and the moneyness, for each cross section of options data. However, recent empirical evidence suggests that the parameters characterizing the IVS change over time. In this paper we study whether the resulting predictability patterns in the IVS coefficients may be exploited in practice. We propose a two-stage approach to modeling and forecasting the S&P 500 index options IVS. In the first stage we model the surface along the cross-sectional moneyness and time-to-maturity dimensions, similarly to Dumas et al. (1998). In the second-stage we model the dynamics of the cross-sectional first-stage implied volatility surface coefficients by means of vector autoregression models. We find that not only the S&P 500 implied volatility surface can be successfully modeled, but also that its movements over time are highly predictable in a statistical sense. We then examine the economic significance of this statistical predictability with mixed findings. Whereas profitable delta-hedged positions can be set up that exploit the dynamics captured by the model under moderate transaction costs and when trading rules are selective in terms of expected gains from the trades, most of this profitability disappears when we increase the level of transaction costs and trade multiple contracts off wide segments of the IVS. This suggests that predictability of the time-varying S&P 500 implied volatility surface may be not inconsistent with market efficiency.
{"title":"Predictable Dynamics in the S&P 500 Index Options Implied Volatility Surface","authors":"Sílvia Gonçalves, Massimo Guidolin","doi":"10.2139/ssrn.406697","DOIUrl":"https://doi.org/10.2139/ssrn.406697","url":null,"abstract":"One key stylized fact in the empirical option pricing literature is the existence of an implied volatility surface (IVS). The usual approach consists of fitting a linear model linking the implied volatility to the time to maturity and the moneyness, for each cross section of options data. However, recent empirical evidence suggests that the parameters characterizing the IVS change over time. In this paper we study whether the resulting predictability patterns in the IVS coefficients may be exploited in practice. We propose a two-stage approach to modeling and forecasting the S&P 500 index options IVS. In the first stage we model the surface along the cross-sectional moneyness and time-to-maturity dimensions, similarly to Dumas et al. (1998). In the second-stage we model the dynamics of the cross-sectional first-stage implied volatility surface coefficients by means of vector autoregression models. We find that not only the S&P 500 implied volatility surface can be successfully modeled, but also that its movements over time are highly predictable in a statistical sense. We then examine the economic significance of this statistical predictability with mixed findings. Whereas profitable delta-hedged positions can be set up that exploit the dynamics captured by the model under moderate transaction costs and when trading rules are selective in terms of expected gains from the trades, most of this profitability disappears when we increase the level of transaction costs and trade multiple contracts off wide segments of the IVS. This suggests that predictability of the time-varying S&P 500 implied volatility surface may be not inconsistent with market efficiency.","PeriodicalId":126917,"journal":{"name":"European Financial Management Association Meetings (EFMA) (Archive)","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2004-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127813008","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}
In this paper we use the quantile regression to analyze size and book-to-market effects on the conditional distribution of stock returns. In contrast with Knez and Ready (1997), the quantile regression can obtain more robust results without trimming informative extremes. We find that size and book-to-market exhibits asymmetric effects on return quantiles. Comparing with Fama and French (1992), the negative relation between size and returns only occurs in stocks that performs well above the average (winners). However, the robust measurements show that size has positive effects on returns. The book-to-market premium has similar influences on return quantiles and is a more consistent risk factor than size does. We also find that the size and book-to-market effects on the tails of the return distribution may have changed since 1982. Our results provide practical implications on momentum strategies.
{"title":"Robust Measurement of Size and Book-to-Market Premia","authors":"Chih-Chiang Hsu, Robin K. Chou","doi":"10.2139/ssrn.407726","DOIUrl":"https://doi.org/10.2139/ssrn.407726","url":null,"abstract":"In this paper we use the quantile regression to analyze size and book-to-market effects on the conditional distribution of stock returns. In contrast with Knez and Ready (1997), the quantile regression can obtain more robust results without trimming informative extremes. We find that size and book-to-market exhibits asymmetric effects on return quantiles. Comparing with Fama and French (1992), the negative relation between size and returns only occurs in stocks that performs well above the average (winners). However, the robust measurements show that size has positive effects on returns. The book-to-market premium has similar influences on return quantiles and is a more consistent risk factor than size does. We also find that the size and book-to-market effects on the tails of the return distribution may have changed since 1982. Our results provide practical implications on momentum strategies.","PeriodicalId":126917,"journal":{"name":"European Financial Management Association Meetings (EFMA) (Archive)","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2003-06-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114259187","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}
This paper evaluates the usefulness of the orthogonal portfolio approach proposed by MacKinlay and Pastor (2000), for the estimation of the expected returns of Swedish industrial portfolios from 1980 to 1997. In this approach the expected returns are linked to the residual covariance matrix of a given factor model. The analysis consists of two related but distinct parts. We first examine the significance of the orthogonal approach as an asset-pricing model. The second part judges the ability of the orthogonal portfolio approach in forming investment strategies. The estimation of the parameters of the applied models requires solution of a difficult and nonlinear likelihood function. We use simulated annealing as our procedure to find the global optimum of the likelihood function. Thus, in contrast to MacKinlay and Pastor (2000) we can let the model determine the importance of the unobserved factor, the orthogonal portfolio, and allow for heteroskedasticity in the idiosyncratic risk of the test assets. We first compare the estimated expected returns and the characteristics of the factor portfolios from different models. Then, all models are evaluated from a portfolio perspective: We calculate the weights of the portfolio with the maximum Sharpe-ratio, the tangency portfolio, and the out of sample Sharpe-ratios of these portfolios are used as the evaluation metric.
{"title":"Investment Strategies Using Orthogonal Portfolios","authors":"Hossein Asgharian, B. Hansson","doi":"10.2139/ssrn.407707","DOIUrl":"https://doi.org/10.2139/ssrn.407707","url":null,"abstract":"This paper evaluates the usefulness of the orthogonal portfolio approach proposed by MacKinlay and Pastor (2000), for the estimation of the expected returns of Swedish industrial portfolios from 1980 to 1997. In this approach the expected returns are linked to the residual covariance matrix of a given factor model. The analysis consists of two related but distinct parts. We first examine the significance of the orthogonal approach as an asset-pricing model. The second part judges the ability of the orthogonal portfolio approach in forming investment strategies. The estimation of the parameters of the applied models requires solution of a difficult and nonlinear likelihood function. We use simulated annealing as our procedure to find the global optimum of the likelihood function. Thus, in contrast to MacKinlay and Pastor (2000) we can let the model determine the importance of the unobserved factor, the orthogonal portfolio, and allow for heteroskedasticity in the idiosyncratic risk of the test assets. We first compare the estimated expected returns and the characteristics of the factor portfolios from different models. Then, all models are evaluated from a portfolio perspective: We calculate the weights of the portfolio with the maximum Sharpe-ratio, the tangency portfolio, and the out of sample Sharpe-ratios of these portfolios are used as the evaluation metric.","PeriodicalId":126917,"journal":{"name":"European Financial Management Association Meetings (EFMA) (Archive)","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2003-06-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116411920","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}
This paper analyses price effects of block trades for the 30 stocks that comprise the Dow Jones Industrial Average for the period January 1993 to October 2001. Previous research shows prices revert following sales, but remain high after buys, creating an asymmetry between block purchases and sales. Extant literature has offered several conjectures as to the source of the asymmetry. We replicate the asymmetry documented in previous literature and provide a new conjecture as to its source, specifically bid-ask bias. Results show that purging block trade price effects of bid-ask bias produces symmetry in the behaviour of block trade price effects. This suggests research design issues are driving the asymmetry documented in previous literature, and that purchases are not more informative than sales.
{"title":"Price Behaviour Surrounding Blocks: Asymmetric or Bid-Ask Bias","authors":"A. Frino, Vito Mollica, T. Walter","doi":"10.2139/ssrn.394987","DOIUrl":"https://doi.org/10.2139/ssrn.394987","url":null,"abstract":"This paper analyses price effects of block trades for the 30 stocks that comprise the Dow Jones Industrial Average for the period January 1993 to October 2001. Previous research shows prices revert following sales, but remain high after buys, creating an asymmetry between block purchases and sales. Extant literature has offered several conjectures as to the source of the asymmetry. We replicate the asymmetry documented in previous literature and provide a new conjecture as to its source, specifically bid-ask bias. Results show that purging block trade price effects of bid-ask bias produces symmetry in the behaviour of block trade price effects. This suggests research design issues are driving the asymmetry documented in previous literature, and that purchases are not more informative than sales.","PeriodicalId":126917,"journal":{"name":"European Financial Management Association Meetings (EFMA) (Archive)","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2003-06-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133975607","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}
A. D. de Miguel, Julio Pindado, Chabela de la Torre
In this paper we investigate the relationship between ownership structure and value in Spanish firms. We therefore provide new evidence on this relation, since the Spanish corporate governance system differs from the ones considered in previous theoretical and empirical research. According to financial literature on corporate ownership structure, we have focused on the concentration of ownership - in order to test the monitoring and expropriation hypotheses - and on insider ownership - looking for evidence in favour of the convergence-of-interest and entrenchment hypotheses. We have estimated our two empirical models using the same methodology so as to avoid several problems emphasized by previous literature. Specifically, we use the Generalized Method of Moments which allows us to eliminate unobservable heterogeneity - using panel data methodology - and to control for potential endogeneity - using instruments. Unlike previous studies, our empirical evidence supports a quadratic relationship between value and ownership concentration. This result confirms not only the monitoring but also the expropriation effect for the very highest concentration values in Spanish firms. The fact that Spanish majority shareholders manage to expropriate the wealth of minority shareholders, while in other countries - such as the UK, the US, Germany and Japan - this does not occur, confirms the idea that differences in corporate governance systems lead to different value-ownership relations. Additionally, the insider ownership model provides results that support a cubic specification for the value-insider ownership relation in Spanish firms. We interpret this evidence as consistent with both the convergence-of-interests and the entrenchment effects. Moreover, we find that Spanish insiders get entrenched at higher ownership levels than their UK and US counterparts. This result is also consistent with the argument that different value-ownership relations might be explained by differences in corporate governance systems across countries.
{"title":"Ownership Structure and Firm Value: New Evidence from the Spanish Corporate Governance System","authors":"A. D. de Miguel, Julio Pindado, Chabela de la Torre","doi":"10.2139/ssrn.393464","DOIUrl":"https://doi.org/10.2139/ssrn.393464","url":null,"abstract":"In this paper we investigate the relationship between ownership structure and value in Spanish firms. We therefore provide new evidence on this relation, since the Spanish corporate governance system differs from the ones considered in previous theoretical and empirical research. According to financial literature on corporate ownership structure, we have focused on the concentration of ownership - in order to test the monitoring and expropriation hypotheses - and on insider ownership - looking for evidence in favour of the convergence-of-interest and entrenchment hypotheses. We have estimated our two empirical models using the same methodology so as to avoid several problems emphasized by previous literature. Specifically, we use the Generalized Method of Moments which allows us to eliminate unobservable heterogeneity - using panel data methodology - and to control for potential endogeneity - using instruments. Unlike previous studies, our empirical evidence supports a quadratic relationship between value and ownership concentration. This result confirms not only the monitoring but also the expropriation effect for the very highest concentration values in Spanish firms. The fact that Spanish majority shareholders manage to expropriate the wealth of minority shareholders, while in other countries - such as the UK, the US, Germany and Japan - this does not occur, confirms the idea that differences in corporate governance systems lead to different value-ownership relations. Additionally, the insider ownership model provides results that support a cubic specification for the value-insider ownership relation in Spanish firms. We interpret this evidence as consistent with both the convergence-of-interests and the entrenchment effects. Moreover, we find that Spanish insiders get entrenched at higher ownership levels than their UK and US counterparts. This result is also consistent with the argument that different value-ownership relations might be explained by differences in corporate governance systems across countries.","PeriodicalId":126917,"journal":{"name":"European Financial Management Association Meetings (EFMA) (Archive)","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2003-06-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123853215","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}
扫码关注我们
求助内容：
应助结果提醒方式：
京公网安备 11010802042870号