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The purpose of this paper is to use a stochastic dominance test to examine the relative performance of value vs growth stocks based on multiple value-growth proxies in the Taiwan stock market.

This work examines whether the return distribution of a value portfolio stochastically dominates that of a growth portfolio using a test proposed by Linton et al. (2005).

By applying stochastic dominance analysis on the full-sample period, the sub-sample period and the state of the world’s economic conditions, the authors find that the earnings-to-price or dividend-to-price ratio is better than the book-to-market ratio as a value-growth proxy in Taiwan. There are robust results even after adjusting for data frequency, a sampling method and sample excluding financial services.

This study makes the first attempt to examine value vs growth strategies based on multiple value-growth proxies in the emerging market of Taiwan by administering the stochastic dominance test.

Corporate social responsibility (CSR) promotes society, reduces risk, and encourages ethical business practices. Due to its relevance, we study how CSR influences firms' sustainable development. We analyze data from 427 New York Stock Exchange (NYSE)-listed firms from 2008 to 2022. The Refinitiv environmental and social score is used to measure CSR, whereas for firms' sustainable development we rely on corporate sustainable growth rate (SGR) and market-based metrics. The analysis employs various econometric techniques, including ordinary least square, fixed effect regression, two-stage least square, generalized method of moment, and simultaneous quantile regression. The results indicate that CSR has a positive and significant effect on firms' sustainable development across all models. This relationship supports the notion that socially responsible business can contribute to long-term financial sustainability in line with “stakeholder theory”, indicating that companies should accommodate the concerns of various stakeholders, including society and the environment, to achieve sustainable development. We evaluate how the conditional distributions of SGR and firms’ value are affected by CSR, categorizing them into high, moderate, and low regimes. The quantile regression estimates indicate that the effect of CSR is more pronounced at upper quantiles, followed by moderate and low regimes. These findings underscore the importance of considering CSR in assessing the SGR and enterprises market value. We also confirm that our results are robust under range of different econometrics' methods. Finally, we enlighten current literature, and our research has useful policy implications for management and investors.

Strategy is ultimately aimed at creating shareholder value. We examine the relationship among intrinsic (DCF) value, market value, and the value of growth options using a “perfect foresight” model. Our findings suggest that Kester's (1984) initial assessment of growth option values may not hold under alternative valuation models. We highlight important issues in the valuation of growth options related to market expectations, modeling assumptions and estimation methods. The findings suggest that the firm's growth option value depends on three factors, each of which impacts investor expectations: (1) the macroeconomic environment; (2) the industry in which the firm participates; and (3) firm specific factors.

This paper examines the application of real option theory to sequential investment decision-making. In an effort to contribute to the development of criteria that discriminate between investments that confer growth options from those that confer deferral options, we introduce a conceptual model that explains technological adoption as a sequence of embedded options. Upon the introduction of each successive technological generation, a firm may either defer investment and wait for the arrival of a future generation or invest immediately to obtain experience that provides a claim on adoption of subsequent generations. We propose that deferral and growth option value is dependent on the magnitude, frequency, and uncertainty of inter-generational change, and the nature of rivalry.

This study analyses the determinants of the value of a portfolio of real options and explores implications for strategic management. It focuses the analysis on four elements: the number of real options in the portfolio, constraints on the number of options that can be exercised, the volatility of underlying assets, and the correlation between underlying assets. These elements are articulated around a trade-off between growth options and switching options and are applied to different strategic situations of technological, market, and macroeconomic uncertainty.

Although the value effect is comprehensively investigated in developed markets, the number of studies examining the Vietnamese stock market is limited. Hence, the first aim of this research is to provide empirical evidence regarding returns on value and growth stocks in Vietnam. The second aim is to explain abnormal returns on Vietnamese growth and value stocks using both risk-based and behavioral points of view.

From the risk-based explanation, the Capital Asset Pricing Model (CAPM), Fama–French three- and five-factor models are estimated. From the behavioral explanation, to construct the mispricing factor, this paper relies on the method of Rhodes-Kropf et al. (2005), one of the most popular mispricing estimations in the financial literature with numerous citations (Jaffe et al., 2020).

While the CAPM and Fama–French multifactor models cannot capture returns on growth and value stocks, a three-factor model with the mispricing factor has done an excellent job in explaining their returns. Three out of four Fama–French mimic factors do not contain additional information on expected returns. Their risk premiums are also statistically insignificant according to the Fama–MacBeth second-stage regression. By contrast, both robustness tests prove the explanatory power of a three-factor model with mispricing. Taken together, mispricing plays an essential role in explaining returns on Vietnamese growth and value stocks, consistent with the behavioral point of view.

There are several value-enhancing aspects in the field of market finance. First, this paper contributes to the literature of value effect in emerging markets. While the evidence of value effect is obvious in numerous developed as well as international markets, both growth and value effects are discovered in Vietnam. Second, the explanatory power of Fama–French multifactor models is evaluated in the Vietnamese context. Finally, to the best of the author's knowledge, this is the first paper that incorporates the mispricing estimation of Rhodes-Kropf et al. (2005) into the asset pricing model in Vietnam.

This paper provides a structural model to value startup companies and determine the optimal level of research and development (R&D) spending by these companies.

This paper describes a new variant of float-the-money options, which can act as a financial instrument for financing R&D expenses for a specific time horizon or development stage, allowing the investor to share in the startup's value appreciation over that duration. Another innovation of this paper is that it develops a structural model for evaluating optimal level of R&D spending over a given time horizon. The paper deploys the Gompertz-Cox model for the R&D project outcomes, which facilitates investigation of how increased level of R&D input can enhance the company's value growth.

The author first introduces a time-varying drift term into standard Black-Scholes model to account for the varying growth rates of the startup at different stages, and the author interprets venture capital's investment in the startup as a “float-the-money” option. The author then incorporates the probabilities of startup failures at multiple stages into their financial valuation. The author gets a closed-form pricing formula for the contingent option of value appreciation. Finally, the author utilizes Cox proportional hazards model to analyze the optimal level of R&D input that maximizes the return on investment.

The integrated contingent claims model links the change in the financial valuation of startups with the incremental R&D spending. The Gompertz-Cox contingency model for R&D success rate is used to quantify the optimal level of R&D input. This model assumption may be simplistic, but nevertheless illustrative.

Once supplemented with actual transaction data, the model can serve as a reference benchmark valuation of new project deals and previously invested projects seeking exit.

The integrated structural model can potentially have much wider applications beyond valuation of startup companies. For instance, in valuing a company's risk management, the level of R&D spending in the model can be replaced by the company's budget for risk management. As another promising application, in evaluating a country's economic growth rate in the face of rising climate risks, the level of R&D spending in this paper can be replaced by a country's investment in addressing climate risks.

This paper is the first to develop an integrated valuation model for startups by combining the real-world R&D project contingencies with risk-neutral valuation of the potential payoffs.

Corporate business portfolios, once bright with future stars, have darkened appreciably of late. With the economies of both North America and Europe moving from the growth of the 1960s to the stagflation of the late 1970s and early 1980s, the classification of business units into question marks, future stars, cash cows, or hopeless dogs has lost much of its relevance. There are simply not enough future stars to go around. Indeed, the life cycle of the market share—market growth matrix, pioneered by the Boston Consulting Group, has been more like that of an entertainment celebrity than a celestial star; it seems to be falling into disfavor, as a technique in corporate planning, almost as rapidly as it rose to prominence.

Injections of foreign direct investment (FDI) are often followed by injections of foreign culture which may not be well received among the local population. If this is the case, culture may impede any positive externalities from FDI. On the other hand, if the people of the host country embrace injections of FDI, this may lead to boosts in not only short-run factors of production but also longer-term technological spillovers. We measure what role cultural make-up of a country plays on the effect of FDI on growth in GDP.

Using values system data from the World Values Survey (WVS), and socioeconomic data from the World Bank, we estimate and plot the marginal effect of FDI on growth as a function of a country's values system for a panel of 73 countries over a span of three decades.

We find that the marginal effect of FDI on growth in GDP differs across varying degrees of cultural values, even after adjusting for level of development. In other words, our analysis indicates that a country's cultural norms do indeed affect foreign investment's impact on economic growth.

To date there is no research that systematically assesses the effect that cultural make-up has on the marginal effect of FDI on growth. We go beyond the use of isolated cultural variables by using data on cultural dimensions that account for most of the observed cultural differences between countries. We believe our findings will work as a launchpad for more novel ways to capture country heterogeneity in growth research.

The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-09-2019-0549.

The value‐premium is the empirical observation that “value” stocks (low market/book) have higher returns than “growth” stocks (high market/book). The purpose of this paper is to propose a new explanation for the value‐premium that the authors call the limits to growth hypothesis.

To guide the testing, a dynamic equity valuation model was used that has the property that profitability increases risk for value firms in anticipation of future growth‐leverage, whereas, profitability “covers” the capital expenditure costs of growth, which decreases risk for growth firms. Because the authors interpret dividends as a corporate response to growth‐limits, they test for this predicted differential relation between profitability and risk for value versus growth stocks with the returns of profitable dividend‐paying firms.

It is found that profitability increases returns to a greater extent for dividend‐paying value firms compared to dividend‐paying growth firms, which is consistent with a differential relation between profitability and risk. At the same time, it is also found that growth firms have lower returns than value firms.

The authors use the limits‐to‐growth hypothesis to explain why profitability can either increase or decrease risk. High‐profitability dividend‐paying growth firms have lower returns than low‐profitability dividend‐paying value firms. This value‐premium is consistent with the argument that high profitability “covers” the capital expenditure costs of growth, which decreases risk and, thus, returns. At the same time, profitability increases returns to a greater extent for value stocks compared to growth stocks, which is consistent with the hypothesis that profitability increases risk for value firms in anticipation of future growth‐leverage.