Advances in Economics, Management and Political Sciences

- The Open Access Proceedings Series for Conferences


Proceedings of the 7th International Conference on Economic Management and Green Development

Series Vol. 34 , 10 November 2023


Open Access | Article

Research on Theory and Methods of Corporate Valuation

Jiale Li * 1
1 Economic and Management Department, Beijing Institute of Technology, Beijing, 102400, China

* Author to whom correspondence should be addressed.

Advances in Economics, Management and Political Sciences, Vol. 34, 105-113
Published 10 November 2023. © 2023 The Author(s). Published by EWA Publishing
This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Citation Jiale Li. Research on Theory and Methods of Corporate Valuation. AEMPS (2023) Vol. 34: 105-113. DOI: 10.54254/2754-1169/34/20231684.

Abstract

Corporate evaluation has been a long-history research field, mostly in finance. There are traditional methods such as DCF, CAPM and APT, which were the most popular valuation method being used in 20th century. Nevertheless, more neoclassical theories have been brought up recently, from the perspectives of investment, pricing or other qualitative areas. Besides, the specific times in post-pandemic environment provide valuable research samples of how company keep survived during the period of declination in economic. Based on the previous traditional research as well as neoclassical and recent studies on business’ new valuation model, this article gives a more comprehensive overview and appraisal about corporate valuation theories, ranging from absolute to relative valuation models, and finally to recent neoclassical models such as EVA valuation, along with other elements that need to concern when processing corporate valuation, which might contribute to the practical use of corporation acquisition and other investor’s decisions in both capital and money market.

Keywords

corporate valuation, absolute valuation, relative valuation, neoclassical models

References

1. Sharpe, W.F.: Capital Asset Prices: a Theory of Market Equilibrium under Conditions of Risk. The Journal of Finance 19(3), 425-442 (1964).

2. Lintner, J.: The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets. The Review of Economics and Statistics 47, 131-155 (1975).

3. Ross, S.: The Arbitrage Theory of Capital Asset Pricing. Journal of Economic Theory 13(3), 341–360 (1976).

4. Su, Y.: A Review of Stock Investment Based on Relative Valuation Models. Regional Governance 50(276), 182-186 (2019).

5. Juma’h, A.H., Torrez, J. and Al-Jafari, M.: Corporate Valuation: A Literature Review. Inter Metro Business Journal 2(2), 39-58 (2006).

6. Tian, Z.: Comparative Analysis of Enterprise Valuation Methods. Foreign Investment in China 16(295), 145-146 (2013).

7. Gordon, M.: The Investment, Financing, and Valuation of the Corporation. Journal of Finance 18(3), 579-581 (1963).

8. Gordon, M.: Dividends, Earnings, and Stock Prices. The Review of Economics and Statistics 41(2), 99–105 (1959).

9. Tarrazo, M.: Piketty’s Capital in the 21st Century and Modern Finance: The Other [r−g] Relationship. The Quarterly Review of Economics and Finance 67, 162-174(2018).

10. Keown, A.J., Martin, J.D., Petty, J.W., Scott, D.F.: Financial Management: Principles and applications 9th edn. Pearson, New York (2002).

11. Hurley, W.J., Johnson, L.D.: Generalized Markov Dividend Discount Models. Journal of Portfolio Management 24 (1), 27–31 (1998).

12. Donaldson, R.G., Kamstra, M.: A New Dividend Forecasting Procedure That Rejects Bubbles in Asset Prices. The Review of Financial Studies 9(2), 333–383 (2015).

13. Markowitz, H.: Portfolio Selection. Journal of Finance 7(3), 77-91 (1952).

14. Zabarankin, M., Pavlikov, K., Uryasev, S.: Capital Asset Pricing Model (CAPM) with Drawdown Measure. European Journal of Operational Research 234(2), 508-517 (2014).

15. Breeden, D.: An Intertemporal Asset Pricing Model with Stochastic Consumption and Investment Opportunities. Journal of Financial Economics 7(3), 265–296 (1979).

16. Darrat A., Li B., Park J.: Consumption-based CAPM models: International Evidence. Journal of Banking & Finance 35(8), 2148-2157 (2011).

17. Fama, E. F., French, K. R.: The Cross Section of Expected Stock Returns. The Journal of Finance 47, 427-465(1992).

18. Fama, E. F., French, K. R.: Common Risk Factors in the Returns on Stock and Bonds. Journal of Financial Economics 33(1), 3–56 (1993).

19. Fama, E. F., French, K. R.: Multifactor Explanations of Asset Pricing Anomalies. Journal of Finance 51(1), 55–84 (1996).

20. Barberis, N., Greenwood, R., Jin, L., Shleifer, A.: X-CAPM: An Extrapolative Capital Asset Pricing Model. Journal of Financial Economics 115(1), 1–24 (2015).

21. Huang, L.: Comparison Between Absolute Valuation Method and Relative Valuation Method: Empirical Analysis of Stocks Based on P/E Ratio Method and Free Cash Flow Model. Times Finance 2(540), 107-108 (2014).

22. Lehn, K., Makhija, AK.: EVA & MVA as Performance Measures and Signals for Strategic Change. Strategy & Leadership 24(3), 34-38 (1996).

23. La Porta, R., Lopez-de-Silanes, F., Shleifer, A. and Vishny, R.: Investor Protection and Corporate Valuation. Journal of Finance 57, 1147–1170 (2002).

24. Drobetz, W., Schillhofer, A. and Zimmermann, H.: Corporate Governance and Expected Stock Returns: Evidence from Germany. European Financial Management 10, 267–93 (2004).

25. Gompers, P., Ishii, L. and Metrick, A.: Corporate Governance and Equity Prices. Quarterly Journal of Economics 118, 107–55 (2003).

26. Beiner, S., Drobetz, W., Schmid, MM., Zimmermann, H.: An Integrated Framework of Corporate Governance and Firm Valuation. European Financial Management 12(2), 249-283 (2006).

27. Barniv, RR., Bao, Y.: Where Corporate Governance and Financial Analysts Affect Valuation. Journal of International Financial Management and Accounting 20(3), 240-273 (2009).

28. Pfister, B., Schwaiger, M., Morath, T.: Corporate Reputation and the Future Cost of Equity. Business Research 13, 343-384 (2020).

29. Wang, QH., Ng, L., Gao, WL.: Does Geographic Dispersion Affect Firm Valuation? Journal of Corporate Finance 14(5), 674-687 (2008).

30. Laeven, L.: Pandemic, Intermediate Goods, and Corporate Valuation. Journal of International Money and Finance 120, 1-22 (2022).

Data Availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License. Authors who publish this series agree to the following terms:

1. Authors retain copyright and grant the series right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this series.

2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the series's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this series.

3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See Open Access Instruction).

Volume Title
Proceedings of the 7th International Conference on Economic Management and Green Development
ISBN (Print)
978-1-83558-089-9
ISBN (Online)
978-1-83558-090-5
Published Date
10 November 2023
Series
Advances in Economics, Management and Political Sciences
ISSN (Print)
2754-1169
ISSN (Online)
2754-1177
DOI
10.54254/2754-1169/34/20231684
Copyright
10 November 2023
Open Access
This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited

Copyright © 2023 EWA Publishing. Unless Otherwise Stated