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The purpose of this paper is to empirically investigate the impact of equity market valuation and government intervention on the research and development (R&D) investments of listed companies in China and their relationship.

Using a manually collected R&D database in the period 2007–2015, this paper constructs a sample of 6,595 firm–year observations and applies the methods of pooled OLS regressions to examine the effects of market valuation and government intervention on corporate R&D expenditures.

This paper finds that market valuation enhances corporate R&D investments, but there is no evidence that government intervention may significantly affect the R&D investments. Government intervention also decreases the sensitivity of corporate R&D investment to stock price, which implies that government intervention weakens the promotion of market mechanism to corporate R&D investment. Furthermore, these effects are stronger in the non-state-owned firms and the non-regulated industries.

This study suggests that the functional borders of markets and government should be reasonably defined and markets play a decisive role in resource allocation to improve corporate innovation and national innovation.

This paper provides a micro view of the relationship between market and government at the stage of transitional economy in China as well as directions for further research on the relationship between stock prices and corporate investments.

Publishes some of the findings of a research project that examined whether valuers and valuations have a role in the provision of more strategic property advice to business occupiers. The research consisted of a postal questionnaire survey of over 250 businesses that examined the role of property and the use of valuations in strategic business decisions. The survey was supported by the findings from 18 structured interviews and an analysis of over 70 sets of company accounts. The results revealed that, despite valuers becoming increasingly involved in measuring corporate efficiency and valuations being used for this purpose, business occupiers do not recognise valuers in a strategic role. Instead, many firms see valuers as providing a single valuation service, the estimation of market value for purchase/sale decisions and corporate disclosure. The research suggests that valuations do have a role to play in the provision of more strategic business advice but the valuer will need to understand the client’s wider business needs and how property plays a part in the client’s business. Valuers need to convince clients that they are not overly technical in their outlook, have broad business skills that include strategic thinking and an awareness of business issues.

This paper aims to investigate the relationship between environmental performance and management and company valuation. With a specific focus on company valuation, this study shows how a firm’s environmental activities, including its environmental management practices, are perceived and valued by its stockholders.

Newsweek’s green ranking data between 2014 and 2016 were used to support this analysis. Environmental performances and environmental management practices of 345 Fortune 500 companies from various industries were included in the data set.

The analysis finds higher valuations for US companies that are more efficient in managing greenhouse gas emissions. In addition, it empirically shows that investors place a higher value on companies with the following environment-related management policies: initiatives that reward top management for achieving environmental goals and third-party auditing of environmental performance.

By incorporating corporate environmental management practices as an additional environmental performance criterion, this research fills a gap in the literature on the potential relationship between corporate environmental performance and company valuation.

The purpose of this paper is to show that distinguishing between gross and net tax shields arising from interest deductions is important to firm valuation. The distinction affects the interpretation but not valuation of tax shields for the famous Miller’s (1977) model with corporate and personal taxes. However, for the well-known Miles and Ezzell’s (1985) model, the authors show that the valuation of tax shields can be materially affected. Implications to the cost of equity and optimal capital structure are discussed.

This paper proposed a simple tax shield clarification that distinguishes between gross and net tax shields. Net tax shields equal gross tax shields minus personal taxes on debt. When an after-tax riskless rate is used to discount shareholders’ tax shields, this distinction affects the interpretation but not valuation results of the Miller’s model. However, when the after-tax unlevered equity rate is used to discount tax shields under the well-known Miles and Ezzell’s (1985) model, the difference between gross and net tax shields can materially affect valuation results. According to the traditional ME model, both gross tax shields and debt interest tax payments (i.e. net tax shields) are discounted at the after-tax unlevered equity rate. By contrast, the proposed revised ME model discounts gross tax shields at the unlevered equity rate but personal taxes on debt income at the riskless rate (like debt payments). Because personal taxes on debt are nontrivial, traditional ME valuation results can noticeably differ from the revised ME model to the extent that after-tax unlevered equity and debt rates differ from one another.

For comparative purposes, the authors provide numerical examples of the traditional and revised ME models. The following constant tax rates and market discount rates are assumed: T_c=0.30, T_pb=0.20, T_ps=0.10, r=0.06, and ρ=0.10. Table I compares these two models’ valuation results. Maximum firm value for the traditional ME model is 7.89 compared to 7.00 for the revised ME model. At a 50 percent leverage ratio, equity value is reduced from 3.71 to 3.49, respectively. Importantly, the traditional ME model suggests that firm value linearly increases with leverage and implies an all-debt capital structure, whereas firm value stays relatively constant as leverage increases in the revised ME model. These capital structure differences arise due to discounting debt tax payments with the unlevered equity rate (riskless rate) in the traditional ME (revised ME) model. Figure 1 graphically summarizes these results by comparing the traditional ME model (thin lines) to the revised ME model (bold lines).

Textbook treatments of leverage gains to firms or projects with corporate and personal taxes should be amended to take into account this previously unrecognized tradeoff. Also, empirical analyses of capital structure are recommended on the sensitivity of leverage ratios to the gross-tax-gain/debt-personal taxes tradeoff.

Financial managers need to understand how to value interest tax shields on debt in making capital structure decisions, computing the cost of capital, and valuing the firm.

The valuation of interest tax shields in finance is a long-standing controversy. Nobel prize winners Modigliani and Miller (MM) wrote numerous papers on this subject and gained fame from their ideas in this area. However, application of their ideas has changed over time due to the Miles and Ezzell’s (ME) model of firm valuation. The present paper adapts the pathbreaking ideas of MM to the valuation framework of ME. Students and practitioners in finance can benefit by the valuation results in the paper.

No previous studies have recognized the valuation issues resolved in the paper on the application of the popular and contemporary ME model of firm valuation to the MM valuation concepts. The new arguments in the paper are easy to understand and readily applied to firm valuation.

Does target firm shareholders excessively paid or adequately rewarded or stumpy compensated? To address this query, the study aims to remix valuation parameters for better combination of mixture so that it represents fair deal value in merger and acquisition (M&A) negotiation process. The purpose of the study is to redesign the existing valuation methods, craft new models and compare them to suggest perceptive guidelines for “valuation governance”.

This research reconstructs discounted cash flows (DCF) and net asset valuations (NAV), originate NRR‐APB approach, MCF‐RS and MCF‐ES and finally compare all seven methods for each select company in the respective industry/sector. Exclusively, estimating the forecasting hurdle rate (FHR) is a core competence of valuation process.

Among the valuation models, all seven methods for select companies have been reported diverse values, however NRR‐APB approach describe factual enterprise value for bargaining the value of target firm in structuring M&A deals.

Due to petite sample, study has limited scope to validate the proposed conceptual models for valuation governance. Particularly, models have developed under the Indian accounting regulations, standards and reporting mechanism. Though, it can be practiced in other accounting standards on trail and error basis.

Valuation practitioners, governments, consultants, M&A advisory, market research and academia may implement these business valuation techniques, guidelines and implications in particular sector/industry to protect the interest of target firm shareholders and justify the consistent value for acquirer/bidding firm. Accordingly, stakeholders' interest could also be sheltered.

The paper intends to introduce NRR‐APB approach, MCF‐RS and MCF‐ES, reengineering DCF and NAV and compare these valuation methods on three companies each in select two industries, auto ancillary and hotels and resorts. Further, it would be adding a token of contribution to the notable area corporate finance. Hence, this article is the first study to argue on valuation governance and recommend state to enact immediately in India.

The literature on project finance appraisal contains several ambiguities mainly concerning the correct method of equity cash flow (ECF) determination. This vagueness can lead to serious misevaluation of these projects. The purpose of this paper is to present and justify a correct method of ECF determination for project finance evaluation.

Based on the analysis of the specificity of project finance ventures and the study of existing literature, the authors propose a coherent model of ECF estimation that avoids misevaluating project finance ventures.

This paper demonstrates that the potential dividends methodology of ECF estimation, used commonly in the corporate finance world, leads to the erroneous valuation of project finance investments. Moreover, simulations demonstrate that the scale of this misevaluation is an increasing function of the debt covenant duration, the required rate of return, and the investment outlay dispersion over time. The proposed model of proper project finance valuation, despite inconsistency with assumptions of the fair value concept, is best suited for project finance venture appraisal, taking into consideration the inherently specific timing of the ECF.

This paper rectifies, clarifies, and extends the range of existing solutions for the project finance valuation and the application of the concepts of actual dividends and potential dividends in different valuation contexts. Furthermore, it proposes a simple and coherent method to value project finance ventures. Additionally, it offers evidence of the scale of NPV misevaluation in project finance, which occurs when the potential dividends approach is utilized.

This article surveys available research on the contingent‐claims approach to risky debt valuation. The author describes both the structural and reduced form versions of contingent claims models and summarizes both the theoretical and empirical research in this area. Relative to the progress made in the theory of risky debt valuation, empirical validation of these models lags far behind. This survey highlights the increasing gap between the theoretical valuation and the empirical understanding of risky debt.

The South African Companies Act of 2008 (SACA2008) seeks to reaffirm the company as a means of promoting the economic welfare and development of South Africa by encouraging efficient, transparent value‐additive corporate management. The purpose of this paper is to present the important role of the cost of capital for financial valuations that are consistent with the purposes of SACA2008, as stated in Section 7.

The relevant sections of SACA2008 of this legislation were studied. The role of the cost of capital in performing and interpreting financial valuations was presented. As the CAPM is widely used, and in cases is the only approach used to estimate the cost of capital, an update of CAPM empirical evidence was presented to affirm the conclusion by Fama and French that the CAPM is not an acceptable way of estimating the cost of capital. The Sarbanes‐Oxley Act of 2002 (SOX) was studied to ascertain the implication of using valuation criteria that lack empirical validity.

Management that makes financial decisions on the basis of criteria that have not been empirically validated may find it difficult to defend challenges to their efforts at complying with SACA2008 and promoting the success of the company.

From an extensive survey of publicly available literature, there is no evidence to suggest that research on the role of the cost of capital in helping achieve the purposes of SACA2008 has been published. Without a valid and reliable cost of capital it will be difficult to achieve the purposes of this legislation.

This paper builds on the “Law and Finance” theory and aims to examine the effect of the legal and institutional environment on the governance–performance relationship in the context of non-US firms. More precisely, it examines whether and how the country’s legal system and the level of investor protection interact with the firm-level corporate governance and affect firm performance.

The authors used the “G-Index” governance score developed by the Governance Metrics International rating for a sample of 12,728 firm-year observations from 23 countries over the 2009–2016 period.

The results show that the interaction between the country-level institutions and corporate governance system significantly affect the firm performance. In particular, the findings indicate that firms operating in common law countries tend to exhibit a positive valuation effect and higher performance than firms with a comparable corporate governance level operating in civil law countries. More precisely, the authors find that in common law countries, higher investor protection with enhanced corporate governance is associated with better firm performance. However, firms operating in civil law countries with weaker investor protection and a comparable corporate governance level tend to experience a negative valuation effect.

The findings suggest that the institutional and legal environment is crucial and important in determining the value-maximizing level of good governance practices. Managers and regulators should carefully analyze the cost of these initiatives and should coordinate it with the needs of the country’s legal system. The challenge for the company will be how to adjust its corporate governance strategy according to the needs and demands of the country’s legal system in which the company operates to improve its performance. The regulators should ensure a fit between the specifics of the national legal and institutional environment and corporate governance standards and practices.

The purpose of this paper is to investigate the impact of firms' cash holdings and ownership concentration on the firms' valuation using an unbalanced panel dataset of non‐financial listed firms in Australia.

The author used a generalized method of moments approach suitable for unbalanced panel dataset to examine the impact of firms' cash holdings and ownership concentration on firms' q‐ratios after controlling for the impact of financing, dividend and investment decisions, respectively.

The paper finds a positive relationship between cash holdings and q‐ratio of Australian firms. The ownership structure moderates the effect of cash holdings on q‐ratio in asymmetric fashion, i.e. for widely held firms, there is a positive relationship between cash holdings and q‐ratio; while for closely held firms, there is significant negative relationship between cash holdings and q‐ratio. Furthermore, changes associated with corporate governance reforms, also effect q‐ratio besides ownership structure. The paper also examined the impact of cash holdings on the market value of the firms over time. As the author predicted, increase in the cash holdings has a negative effect on the firms' market valuation, and this effect slows down over time. Overall, the empirical analysis finds support for similar findings documented for the developed countries in the literature.

The sample consists of non‐financial listed firms over the period of 1995 to 2010.

The results imply that widely‐owned firms have lower cash holdings because managers are able to access capital market easily compared to firms with concentrated ownership, which might have complex agency and information asymmetry problems. These findings are consistent with the agency costs. Managers in less widely‐held firms have more discretion over cash holding policies, and the value reduction imposed on these firms may reflect shareholders' recognition of the possibility of managerial expropriations.

This is believed to be the first paper to explore agency costs of cash holdings for Australian firms.