scholarly journals Financial Diagnostics of Banks in the Process of Consolidation: The Goals, Methods, Analytical Approaches

2020 ◽  
Vol 12 (515) ◽  
pp. 361-368
Author(s):  
L. O. Prymostka ◽  
◽  
I. V. Krasnova ◽  
O. K. Lytvynenko ◽  
◽  
...  

The article is aimed at substantiating the economic feasibility and choosing from the methods of financial diagnostics of banks during consolidation in order to evaluate an agreement object as an investment project. The main directions of financial diagnostics of the M&A agreements for banks are defined. Emphasis is placed on the need to differentiate between the interpretation of the concepts of «financial diagnostics», «due diligence» and Financial Due Diligence (FDD). Taking into account the world and domestic experience, due diligence understanding is systematized and generalized through consideration of the related processes of the M&A agreement at the transaction level. The factors of the M&A agreement, which outline the areas of due diligence, are determined, the understanding of which ensures to have reduced the transactional risk of the transaction. It is specified that the main analytical instrumentarium for adequate substantiation and formation of an absolutely complete idea of the value of the agreed object is the FDD, which also serves as a quality basis for elaborating a strategy for the development of consolidated bank after the completion of the M&A agreement. The traditional FDD analytical instrumentarium, which covers both financial and institutional aspects, is proposed to be supplemented by including banks in the range of financial risks and sensitivity assessments. It is noted that to determine the internal value of the bank – the object of an agreement as a project for investment, approaches are used to forecast future activities, which include methods of discounting cash flows (DCF) and assessing the impact of the internal rate of return on the weighted average cost of capital (IRR / = WACC). On the basis of the generated sample of financial reports of 150 world banks, according to Refintiv, modeling of attractiveness of banks as investment projects through approaches (DCF) and (IRR / = WACC) is carried out. Criteria have been formed to choose an approach to assess the internal value of the banking business. On the basis of the allocated criteria, the results of modeling the attractiveness of projects according to the chosen approaches are compared. It is concluded that the most optimal in terms of accuracy of determining the internal (fundamental) value of the bank is the approach through the modeling of cash flows.

2021 ◽  
Vol 27 (11) ◽  
pp. 2548-2574
Author(s):  
Andrei I. MASTEROV

Subject. This article analyzes the economic and demographic conditions for the Russian pension system’s development and the impact of the effectiveness of investment projects implementation on pension savings. Objectives. The article aims to analyze the Russian pension system’s development difficulties in terms of an unfavorable investment climate and negative demographic trends, and identify ways to propel the pension savings investing profitability increase. Methods. For the study, I used induction and deduction, and the methods of systems and statistical analyses. Results. The article offers recommendations for the development of a system of measures aimed at improving the methodological support for the preparation and implementation of management decisions on investment project management. Conclusions and Relevance. Solving the problems of the pension system through the development of voluntary pension savings is constrained by the low efficiency of the investment projects implementation. The results of the study can be used when developing legislative, organizational and methodological measures aimed at improving the efficiency of investing pension savings in investment projects implemented in the Russian Federation.


2020 ◽  
Vol 22 (1) ◽  
pp. 119-124
Author(s):  
Volodymyr Kharchenko ◽  
◽  
Hanna Kharchenko ◽  

Introduction. The article deals with the modeling features in the implementation of investment projects using the Monte Carlo method. The purpose of the article is to substantiate the feasibility of using economic and mathematical models to identify the risks of investment projects in agricultural production, taking into account the randomness of factors. Results. The expediency of using this method during the analysis of projects in agriculture is determined. This type of modeling is a universal method of research and evaluation of the effectiveness of open systems, the behavior of which depends on the influence of random factors. Particular attention is paid in such cases to decisions on the implementation of investment projects. The expediency of using this method in the analysis of projects in agriculture is determined. The main characteristics of the investment project are considered: investments involve significant financial costs; investment return can be obtained in a few years; there are elements of risk and uncertainty in forecasting the results of the investment project. The algorithm of the analysis of investment projects consisting of various stages is offered. The importance of investigating the risks of investment projects in agricultural production is substantiated. It is investigated that the basis of the Monte Carlo method is a random number generator, which consists of two stages: generation of a normalized random number (uniformly distributed from 0 to 1) and conversion of a random number into an arbitrary distribution law. The task of choosing an investment project for a pig farm is proposed. The calculations revealed that the amount of the expected NPV is UAH 63,158.80 with a standard deviation of UAH 43,777.90. The coefficient of variation was 0.69, so the risk of this project is generally lower than the average risk of the investment portfolio of the farm. Conclusions. The results of the analysis obtained using the method of Monte Carlo simulation are quite simple to interpret and reflect the change of factors over a significant interval, taking into account the probabilistic nature of economic factors. Thus, this method allows the implementation of the investment project to assess the impact of uncertainty on the final result of the project.


Author(s):  
N. Koshevsky

The introduction provides a brief review of the literature on methods for assessing the effectiveness of investment projects, based on which the choice of optimal sources of financing is made. In the main part of the work, various scenarios for the implementation of an investment project are disclosed: sources of financing that are alternative to the baseline scenario are attracted. In the final part of the work, the considered scenarios are assessed and conclusions are drawn.For each enterprise, improving the financial and economic efficiency of its activities is one of the priority tasks. These tasks include the need to increase the return on capital, the choice of funding sources that have a positive effect on economic efficiency. This paper examines the ways of choosing the optimal, from the point of view of the impact on economic efficiency, instruments for financing an investment project. A practical case of project financing with an assessment of the effectiveness of the implementation of an investment project is considered. To analyze the alternatives, a financial business model was developed, which allows you to quickly make changes, update performance indicators and make decisions about the required capital structure. It is concluded that the optimal capital structure with the highest NPV indicator and that when assessing the efficiency parameters, it is necessary to make an adjustment for the possible presence in the company's capital structure of funding sources that distort the comparability of the project in relation to projects without such sources (for example, budget grants).


As explained in the foregoing chapter, once the relevant cash outflows and inflows associated with a foreign direct investment project are estimated so as to calculate the net cash flows, the desirability of the investment project should then be determined in terms of its economic profitability. Therefore, in this chapter the methods widely used in evaluating investment projects are discussed and their advantages as well as shortcomings are highlighted. Later in the chapter, evaluating foreign direct investment projects from the viewpoint of the parent company is elaborated in terms of profit and/or income transferred to the home country. The same investment evaluation techniques were applied to the net cash flows transferred to the home country of the parent company. The possible income and/or dividends to be remitted to the home country of a parent company are identified and discussed so as to reflect the viewpoints of investing parent companies when planning foreign direct investments. This two-level evaluation approach is generally followed in practice to make sure that direct investments are profitable at both host and home country levels, since an investment project that is not profitable at host country level would not be profitable at home country level either or a project that is profitable at host country level may not be profitable at home country level.


2019 ◽  
Vol 97 ◽  
pp. 06034 ◽  
Author(s):  
Elena Lyapuntsova ◽  
Iulia Belozerova ◽  
Ilona Drozdova ◽  
Oleg Korol

The purpose of the article is to review the theoretical foundations and practical examples of investor assessment with an integrated approach to the development of urban infrastructure. The article analyzes the conditions for reducing the investment costs of projects. For this purpose, methods of clarifying the conceptual apparatus, classification, systematization and an integrated approach are used. The significance of an investment project depends on its positive influence on at least one of the external or internal markets: material and financial products, services and labor, on the social environment and the environment. Examples are provided of the impact on urban planning and the ecology of the urban landscape of investment projects in the field of tourism in recent years, implemented at the expense of the Federal Target Program “Development of domestic and inbound tourism in the Russia for 2011-2018.” in Sarapul, Barnaul and Cherepovets. The authors conclude that in the examples cited there is a relationship between the risk tolerance of the project and the complexity of the approach to its implementation, and as a result, the amount of investment. Large projects are designed not only to solve specific problems of the investor, regions, economy, state and society, but also ensure the profitability of the state budget at various levels, create new jobs, ensure GDP growth in the country and investment in various sectors, create conditions for the development of the country’s regions. The narrowly focused investment projects are fraught with great risks for the investor due to the selectivity and limited scope of the manifestation of effects.


2020 ◽  
pp. 164-171
Author(s):  
G. G. Utenov

The performance of investment projects in acquisitions of companies by private equity funds has been explored by assessing the financial and valuation results of such transactions in two directions: change in the valuation multiple of an acquired company over the period of the investment project and the impact of a fund on a company’s operational efficiency. As a result of the analysis, the hypothesis of the higher EV/EBITDA exit multiple of the private equity fund compared to the same entry multiple was not confirmed. However, the hypothesis that private equity funds are able to increase the operational efficiency of portfolio companies on average better than other types of investors, confirms the effectiveness of private equity funds and high performance of such investment projects.


2019 ◽  
Vol 20 (6) ◽  
pp. 1143-1167
Author(s):  
Faris Nasif Alshubiri

This study aims to identify public financial indicators involved in the investment projects of GCC countries. The data was collected from the IMF and the MEED from 2011-2017. The study measured the impact of public finance based on eight variables and two proxies (national and trade accounts) on the investment project development proxy, which is measured by the total value of projects planned or currently underway and the value of the ten largest projects currently underway. The results showed that Saudi Arabia and the UAE rank high in both proxies of investment project development. The simple regression results also illustrated that real GDP, the real non-oil GDP variables of national account proxy, and the value of the exported goods and services variable of the trade accounts proxy have a significant impact on the total value of projects planned or currently underway. Meanwhile, only three factors of national accounts, gross national savings, CPI inflation, and current account balance, have a significant impact on the value of the ten largest projects currently underway. The overall conclusion of the study is that GCC countries have established high-value development projects in different cities that require a proper public policy to efficiently manage capital expenditure within the public sector.


2009 ◽  
Vol 50 (3) ◽  
pp. 415-449 ◽  
Author(s):  
Jean-Pierre D. Chateau

Abstract The financial model presented in the article attempts to further integrate capital budgeting into the firm's overall financial planning policy. Although it is an extension and generalization of Bernhard and Weingartner's previous models, it differs from these works by some basic assumptions related to both the objective function and constraint set. First, the objective function stresses the growing role of managerial discretion as opposed to the common assumption of maximizing shareholders' wealth. In particular we assume that managers wish to maximize the size of the firm under their control at the end of some future time horizon. Since net cash flows of the investment projects selected are sources of future investment funds, the managers try to keep the shareholders' dividends to a minimum level, sufficient enough however to pacify them. Secondly, the model constraints embody the complete set of financial instruments available to the corporation managers: in a sense, this enlarges the previous models' short-term external financing facilities by considering simultaneously the alternative long-term external financial instruments, namely equity and bond issues. In the latter case, the refunding features are incorporated in the constraints. The constraints also imply that managers prefer steady growth of net cash flows through time. This contrasts with the usual maximization approach which has been shown to favor long-term investment projects with somewhat more erratic net cash flows. The derivation of the Kuhn and Tucker conditions for the model allows us to show the impact of the opportunity cost of the various instruments on that of the liquidity requirement and the investment projects selection criterion. Finally, the duality properties also highlight the reciprocal relationships existing between the various opportunity costs, both internal and external.


2020 ◽  
Vol 23 (12) ◽  
pp. 1404-1424
Author(s):  
M.V. Sechenova

Subject. The article discusses a model to evaluate the performance of investment projects taking into account taxation in the context of inflation. Objectives. The aim is to develop formal tools for investment project efficiency evaluation to unveil the impact of various taxation schemes on project performance under main types of inflation. Methods. The study draws on methods of systems analysis, economic-mathematical modeling, financial mathematics, statistical economics, and mathematical analysis. Results. The paper provides a detailed analysis of the impact of inflation on tax payments under various tax regimes when evaluating the investment project performance. I developed a method to calculate indicators of project performance under the main types of inflation, using an analytical model that considers tax expense under various tax treatment. Conclusions. The analytical model enables to elaborate the generalizing record of formal tools for investment process efficiency evaluation as applied to the specifics of tax payments in the investing activity of some enterprises. Calculations of investment project efficiency in the conditions of inflation in nominal and real cash flows are not equivalent because of the existence of non-indexed taxes and amortization charges. When calculating in real prices, it is necessary to consider this adjustment.


2019 ◽  
Vol 11 (23) ◽  
pp. 6770
Author(s):  
Małgorzata Dudzińska ◽  
Stanisław Bacior ◽  
Barbara Prus

Designing and implementing investment projects are activities that have a direct impact on the natural environment and pose a threat to sustainable development of rural areas. The issue of agricultural production space protection during the implementation of linear projects in Poland is often only mentioned at the design stage as the final element. The aim of the study is to propose a tool to enable an assessment and modelling of a motorway design variant in order to minimise the impact on the agricultural production space. Four indicators introduced in the modelling procedure include the loss of agricultural land, a decrease of land productivity in the vicinity of an investment project, changes in the spatial structure of areas divided by the investment, and difficulties resulting from the accessibility of areas. The superiority of the proposed method over consolidations implemented in the vicinity of a motorway is due to the introduction into projects not only of elements organising the space but also attributes that prevent the reduction of the production capabilities of the land located in the vicinity of the motorway (Module I) and, secondly, the elements decreasing the re-organisation of the space (Module II).


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