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Article

G.A. Karathanassis and S.N. Spilioti

Early theoretical work on equity valuation suggests that equity prices are determined by variables such as dividends and growth in dividends. However, these “traditional”…

Abstract

Early theoretical work on equity valuation suggests that equity prices are determined by variables such as dividends and growth in dividends. However, these “traditional” views have been challenged by recent studies that seem to indicate that equity prices are determined by book value and discounted future abnormal earnings. This paper employs panel data methodology and equity prices from Athens Stock Exchange empirically to compare the performance of the traditional and the more recent models of equity valuation. The results show that the performance of the Ohlosn (1995) model is quite similar to that of the traditional models even though in some cases Ohlson’s model performance appears to be superior.

Details

Managerial Finance, vol. 29 no. 9
Type: Research Article
ISSN: 0307-4358

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Article

G.A. Karathanassis

The paper compares the Net Present Value and the Internal Rate of Return Methods paying particular attention to Mutually Exclusive Projects. In addition it looks into the…

Abstract

The paper compares the Net Present Value and the Internal Rate of Return Methods paying particular attention to Mutually Exclusive Projects. In addition it looks into the reinvestment rate assumption concept. Using a different approach to those used to‐date, it is shown that the reinvestment assumption should not concern analysts, provided they use the Net Present Value Method.

Details

Managerial Finance, vol. 30 no. 10
Type: Research Article
ISSN: 0307-4358

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Article

Day‐Yang Liu, Kuo‐An Tseng and Szu‐Wei Yen

The purpose of this paper is to examine the validity of the Ohlson model and to explore the influence of intellectual capital (IC) on corporate value (V) and value…

Abstract

Purpose

The purpose of this paper is to examine the validity of the Ohlson model and to explore the influence of intellectual capital (IC) on corporate value (V) and value creation (VC) in order to develop a business valuation model served as the managerial criterion of IC.

Design/methodology/approach

Hypotheses are based on current research on the Ohlson model and IC. Descriptive statistics are used to find the data patterns. Information content and incremental information provided by various capital sources are validated through multiple and stepwise regression.

Findings

Corporate value is measured by both IC and financial capital (FC). The Ohlson model with FC reveals information that is significant in corporate value. Besides, FC and IC – mainly, innovation and human capital – contains a great deal of incremental information in terms of V and VC.

Research limitations/implications

In addition to financial statement, IC must be taken into account when intending to do business valuation.

Practical implications

To create higher corporate value, corporations must actively place a high premium on their IC and manage it well, particularly for innovation and human capital.

Originality/value

This paper focuses on the information technology industry in Taiwan. It, respectively, uses the share price and price and book value models to represent V and VC. It cites the more complete four aspects of IC, which are referred to as “other information”, to combine IC and the Ohlson model.

Details

Journal of Intellectual Capital, vol. 10 no. 2
Type: Research Article
ISSN: 1469-1930

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Article

Kuo-An Tseng, Ching-I Lin and Szu-Wei Yen

The purpose of this paper is to investigate the relationship among intellectual capital (IC), financial capital (FC), firm value (V), and value creation (VC) in different…

Abstract

Purpose

The purpose of this paper is to investigate the relationship among intellectual capital (IC), financial capital (FC), firm value (V), and value creation (VC) in different business cycles (BC) for the conduct of strategic management that will maintain stable values and further increase V.

Design/methodology/approach

This research cites ICs as “other information” to combine ICs and the Ohlson model. Information provided by various capitals is validated by multiple regression analysis. Multi-group analysis is performed to test whether the coefficient is moderated by BC.

Findings

Results indicate the significant information of ICs and FC, and the contingency perspective of BC. The value relevance of ICs is moderated by BC. Prosperity has more explanatory capacities, and recession ICs yield more incremental information.

Research limitations/implications

VC is influenced by both ICs and FC. Besides, the macroeconomic situation should also be considered in strategic management and VC management.

Practical implications

In addition to ICs and FC, the macroeconomic situation must be taken into account when conducting strategic management, valuation management, investment decision, or industrial policy.

Social implications

Results indicate a contingency of BC, which can be a reference for enterprises to create higher V, for investors to make appropriate investment, as well as for governments to formulate sound industrial policies.

Originality/value

This paper applies BC to explore the value relevance of ICs and FC, leverages two models to represent V and VC, and cites complete four aspects of IC as “other information” to combine ICs and Ohlson model.

Details

Journal of Intellectual Capital, vol. 16 no. 1
Type: Research Article
ISSN: 1469-1930

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Article

Harilaos Mertzanis

The effectiveness of corporate governance enforcement is a complex issue requiring the understanding of the role of institutional factors. The latter may or may not…

Abstract

Purpose

The effectiveness of corporate governance enforcement is a complex issue requiring the understanding of the role of institutional factors. The latter may or may not converge towards best practices, depending upon the extent to which history and politics matter more than purely economic or efficiency‐related considerations for convergence. The appropriateness and effectiveness of corporate governance enforcement mechanisms differ among market economies and cannot be attributed to one single factor nor does any such factor have the same significance in all countries as it depends on the relative state of development of financial intermediation. This paper aims to address these issues.

Design/methodology/approach

A critique is launched on the hypothesis of legal conformity used to explain the deviation of corporate governance practices and enforcement efficiency from is considered as best practice. The critique follows an historical development approach and is substantiated with some new empirical evidence of ownership structures and market views.

Findings

Empirical evidence on ownership structures and on the market views regarding the effectiveness of corporate governance legislation shows that for an understanding of the relationship between financial intermediation and corporate governance broader institutional influences must be taken into consideration.

Research limitations/implications

The analysis of empirical evidence needs detailed expansion and proper association with institutional elements to provide a more comprehensive understanding of corporate governance enforcement efficiency.

Practical implications

The exercise of corporate governance enforcement is an interactive process that goes beyond the role of legal rules and must combine an optimal set of private and public mechanisms properly tailored to each corporate governance regime.

Originality/value

New empirical evidence is provided on ownership structures and on the market view regarding the effectiveness of corporate governance legislation and a broader account is provided on institutional setting for understanding corporate governance policy.

Details

Journal of Financial Regulation and Compliance, vol. 19 no. 3
Type: Research Article
ISSN: 1358-1988

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Article

David DeBoeuf, Hongbok Lee, Don Johnson and Maksim Masharuev

The purpose of this paper is to contribute to financial managers’ capital budgeting decision-making processes by proposing a new paradigm of capital investment appraisal…

Abstract

Purpose

The purpose of this paper is to contribute to financial managers’ capital budgeting decision-making processes by proposing a new paradigm of capital investment appraisal. The expected return, required return structure of the proposed purchasing power return (PPR) methodology eliminates the many flaws associated with the competing internal rate of return (IRR) and modified IRR (MIRR) techniques.

Design/methodology/approach

The authors provide a new framework for examining long-term investment projects through a percentage return prism. Unlike that of IRR and MIRR, mathematical consistency with net present value (NPV) is a design requirement.

Findings

PPR eliminates the many flaws found in the IRR and MIRR methodologies, is mathematically consistent with NPV, and identifies positive-NPV investments forecasted to reduce the company’s purchasing power. These projects are acceptable under NPV, but flagged for additional review and potential rejection. Created to examine projects on a percentage return basis, PPR employs market-based inflation rates to convert all cash flows into constant purchasing power units of measure. From these units, an expected real return is estimated and compared to the project’s inflation-adjusted required return, resulting in an accept/reject decision consistent with that of NPV.

Originality/value

The proposed PPR is a new paradigm of capital investment appraisal that eliminates the many problems found in the IRR and MIRR techniques, is mathematically consistent with the NPV method, and helps financial decision makers examine investment projects on an expected percentage return basis. PPR also flags for further review projects expected to actually reduce the company’s purchasing power.

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Article

Ade Thompson Ojo and Olusegun Felix Ayadi

The purpose of this paper is to investigate if the prevalence of corruption and other unwholesome financial practices in Nigeria contributed substantially to the stunted…

Abstract

Purpose

The purpose of this paper is to investigate if the prevalence of corruption and other unwholesome financial practices in Nigeria contributed substantially to the stunted growth of the capital market in general, and the stock market in particular.

Design/methodology/approach

The paper employed Gregory–Hansen cointegration approach to test the long-run equilibrium relationship between the occurrence of predatory banking practices and stock market capitalization in Nigeria.

Findings

There exists a long-run equilibrium relationship between bank fraud and stock market capitalization but with a structural break in 2005.

Practical implications

There is an urgent need to overhaul and re-assess from time to time the existing systems of internal checks and controls in banks, as well as other financial institutions in Nigeria.

Originality/value

This paper is the first to empirically test the long-run equilibrium relationship between bank fraud and stock market capitalization in Nigeria.

Details

Journal of Financial Crime, vol. 21 no. 3
Type: Research Article
ISSN: 1359-0790

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Article

George Karathanassis, Nikolaos Philippas, Efthymios G. Tsionas and Demosthenes Hevas

In this paper we investigate the influence of institutional investors on share prices using data from companies quoted on the Athens Stock Exchange. For finance theorists…

Abstract

In this paper we investigate the influence of institutional investors on share prices using data from companies quoted on the Athens Stock Exchange. For finance theorists the value of an investment, real or financial, is a function of its expected benefits and the riskiness of these benefits. Whatever influences are exerted by the structure of equity ownership are diversified away by efficient risk‐averse investors. Managerial and agency theorists argue that the particular ownership structure may have an effect on share value or returns. Their arguments are based (mainly) on the consequences of the separation of ownership from control. In addition to traditional methods of estimation we have used Chamberlain’s (1982) multivariate panel data estimator, which allows for arbitrary patterns of error autocorrelation and parameter temporal behavior. Among all alternative methods of estimation used, only this one produced a statistically significant and econometrically well specified relationship between share prices and institutional shareholdings.

Details

Managerial Finance, vol. 30 no. 10
Type: Research Article
ISSN: 0307-4358

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Article

David Hughes, Richard Hutchins and Vassia Karathanassi

The article examines how purchase involvement theory can be used to assist marketing management in making more effective marketing mix decisions. The relationships between…

Abstract

The article examines how purchase involvement theory can be used to assist marketing management in making more effective marketing mix decisions. The relationships between product purchase involvement and its antecedents are analysed, using examples from the Greek market for cheese. Mechanisms for measuring purchase involvement are identified. Product profiles are constructed for varieties of cheese and their usefulness as a segmentation tool is discussed. Implications of the results for marketing management and areas for further research are identified.

Details

British Food Journal, vol. 100 no. 7
Type: Research Article
ISSN: 0007-070X

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Article

G. Karathanassis, C. Patsos and M. Glezakos

Outlines the special characteristics of the Athens stock exchange which may cause misspecification in the simple market model and make Dimson type models more appropriate…

Abstract

Outlines the special characteristics of the Athens stock exchange which may cause misspecification in the simple market model and make Dimson type models more appropriate. Refers to previous research on then and nonsynchronous trading, discusses the methodological issues involved and applies both simple and Dimson type models to 1993‐1997 data for 22 Greek shares. Finds the latter “in many ways more useful” than the simple model, summarizes the main conclusions and suggests that they may be particularly suited to emerging markets in bullish periods.

Details

Managerial Finance, vol. 25 no. 8
Type: Research Article
ISSN: 0307-4358

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