Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )
considersomeoftheempiricalevidenceontherelationship between firm value and complexity. Cost of Opacity In thepreceding section,w ...
Egypt 58 23 Greece 57 22 Guatemala 65 28 Hong Kong 45 12 Hungary 50 17 India 64 28 Indonesia 75 37 Israel 53 19 Italy 48 15 Japa ...
Venezuela 63 27 In an alternate measure of the cost of complexity, Price Waterhousemeasuredthedefaultspreadonsovereignbonds issu ...
Thereasonsforthediscounthavebeenwidelydebated,with manyattributingittothelackoffocusinthesefirmsandthe inefficiencies that follo ...
by firms and reported an average excess return of 1.45 percent for 77 divestitures between 1977 and 1982. 23 Theyalsonotedaninte ...
firms, although the magnitude of the impact is debatable. The S&P study on transparency and disclosure referenced earlier al ...
investors being willing to pay more for stocks in these markets. When firms in emerging markets have American depositaryreceipt ...
themorecomplexa financialstatementbecomes,themore difficultitistogetbasicinformationweneedtocompletea valuation.Wehavealsoshowns ...
areconcernedaboutlong-termvaluemaydeludethemselves into believing their own forecasts, optimistic though they mightbe. It isnot ...
Adjust the Cash FlowsThesimplestwaytodealwithcomplexityistoadjust thecashflowsoffirmsforthecomplexityoftheirfinancial statements ...
Infact,theconversionofopacityintoanimplicittaxbyPrice Waterhouserepresentsadiscountingofthecashflows.We couldincreasethetaxratef ...
portfolio of complex firms historically to the returns we wouldhave earnedona market index.Forinstance, if we would have earned ...
had,onaverage,a 1 percenthighercostofcapitalthanthe most transparent firms (bottom 20 percent). 4.Ifthecomplexityisnotontheasset ...
growthperiodthatemergewillresultinalowervalueforthe firm. Apply a Complexity Discount We could do a conventional valuation of a ...
ratios to expected growth rates, betas, payout ratios, and numberofpagesin the10-Kfor eachofthesefirms(asa measure of complexity ...
Asinthecaseofdiscountedcashflowvaluation,we coulddoaconventionalrelativevaluation(with no adjustment for complexity) and then d ...
usuallynoble, laws areblunt instruments thatoften create newproblemsintheprocessofsolvingoldones.Restrictions onthegranting ofop ...
3.Firmsshouldnotbeallowedtomaintaindifferentbooksfor taxandreportingpurposes.Thedifferentrulesfollowedinthe twosetsofbooksfordep ...
and thus have become cheerleaders for firms rather than questioning analysts. Itistheresponsibilityofanalyststodemandinformation ...
shouldpushforsmallerboardswithmoreoutsidedirectors, selected not by the CEO but by an independent group representing stockholder ...
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