Comparing the informativeness of sustainability disclosures versus ESG disclosure ratings

Purpose The purpose of this paper is to examine the impact of sustainability disclosures and disclosure ratings on firm value. This paper compares the informativeness of sustainability disclosures in company reports versus environmental, social and governance (ESG) disclosure ratings. The authors examine the extent to which they provide incremental information. Design/methodology/approach The sample consists of panel data from over 2,600 publicly-listed non-financial US companies for the period 2014–2018. The authors obtain sustainability disclosures from Sustainability Accounting Standards Board (SASB) Navigator and ESG disclosure scores from Bloomberg. The authors regress market value and/or stock price on sustainability disclosures and ESG scores to evaluate information content. Findings ESG scores are positively associated with market value and price. Sustainability disclosures in the form of metrics and company-tailored narratives provide incremental information content on market value and/or price. Boilerplate disclosures reduce market value and price. Sustainability disclosures and ESG scores provide incremental information, suggesting that it would be beneficial to harmonize standards for reporting sustainability disclosures. Research limitations/implications The limitation is that the authors have only considered sustainability disclosures for a sample of US companies from two sources – SASB Navigator and Bloomberg. Practical implications The paper provides some evidence that may be pertinent to the debate on whether to harmonize the guidance on reporting sustainability issues. Social implications The paper provides evidence on the benefits to firms for reporting sustainability issues. Originality/value This paper is among the first to analyze company sustainability disclosures obtained from two different sources – SASB Navigator and ESG disclosure ratings – and compare them for relevance for company valuation. With SASB Navigator, the authors obtain further refinement into the nature of the information provided in the sustainability disclosures, that is, boilerplate, company-tailored or metrics disclosures.

Assessing value of a digital company: Uber’s IPO 2019

Theoretical basis Via this case, students are introduced to several alternative methods of valuation, including the valuation based on the “real options” theory. The novelty of the case is the link between valuation and the type of innovation that the company represents. The suggested valuation frameworks, which include both quantitative and qualitative assessments, are applicable not only in the context of an IPO valuation but also in the context of any kind of M&A activity. Research methodology This case was prepared mostly via secondary research. All the information about Uber and the industry was collected via publicly available sources. No internal documents of the company were used in the preparation of this case. The primary research consisted of an interview with the protagonist Catherine (whose name is disguised). Other disguised elements in the case include the name of the Value Investor conference organizer (Spyros Spyrou, not his real name), the country of the Value Investor conference (omitted) and the conference venue (Princess hotel, not any actual venue). Case overview/synopsis In 2019, Uber, the famous ride-sharing company, made waves in financial markets as the most controversial IPO valuation. With a wide range of proposed values, Uber puzzled investors, once again living up to its fame of a rebel and a disruptor. When Uber finally went public in May 2019, its IPO valuation stood at $82.4bn. The heated discussion in the media continued even after the IPO: “Is Uber worth this amount? Is there an upside potential for the investors who bought shares at the IPO price? What if this is a hype and markets are simply embracing higher valuations?” Complexity academic level This case can be used at the undergraduate, graduate (MBA) or executive level in finance-related courses such as Company Valuation or Valuing Innovation, which cover the topic of valuation and specifically the topic of valuing innovative companies.

Environmental performance, environmental management and company valuation

Purpose 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. Design/methodology/approach 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. Findings 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. Originality/value 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.

Company-Specific Risk and Small Company Valuation

A significant role of forensic accountants is valuing privately held companies (Domino, Stradiot and Webinger 2015; Trugman 2017; Allee, Erickson, Esplin and Yohn 2020). This study examines the role of private company transaction features on the composition of capitalization rates, industry risk premiums, and company-specific risks for private companies. We find that company-specific risk accounts for at least 50 percent of the capitalization rate. Further, while the industry risk premium represents less than 2 percent of the capitalization rate, it is significantly associated with company-specific risk, suggesting that industry risk is an important determinant of company-specific risk. Finally, we find evidence that several private company transaction features are associated with company-specific risk. These findings represent an important step in understanding capitalization rates and company-specific risk for private company valuation. These findings should also help practitioners and academics better determine the cost of capital for private companies.

MODERN DILEMMAS OF THE COMPANY VALUATION

The article is devoted to the problems of company valuation, new challenges to analyze and evaluate companies and their market potential in terms of modern economy. Evaluation of the company's value is undoubtedly an important part in the business management process and is an effective management tool for enterprises of any organizational and legal form of ownership. Improved methods for assessing the value of a company can become the foundation for the informed identification of the real value of a business. The research reviews value drivers, which generate most of the company's value. It is proposed to group value determinants into the following categories: financial, marketing and intangible. The aspects of investigates the irrational assessment of business value based on manipulated information spotlighted in the paper. The research has for its object to consider methods of estimating the company's value according to the popular American classification. Nowadays, methods are grouped according to the following approaches: asset-based, income-based, market-based, real options and combined, but their effectiveness is reduced due to the lack of general principles for choosing a business valuation. Also, the detailed review of the advantages and disadvantages of the above methods has been carried out, to create a unique approach that will allow to adapt the experience of foreign countries to Ukrainian realities. Thus, nowadays, it was found that there are a large number of models and techniques to estimate the value of the enterprise, but in most cases, it is western management and evaluation techniques that do not always adapt to the characteristics of Ukrainian business, and therefore their application can give results of the assessment, which deviate significantly from reality. It is proposed to develop a concept for combining various methods using a synthetic formula and indicate the general cost factors for each specific enterprise, which will take into account all types of interactions between factors. The article presents great interest to modern economists, corporate managers and students of financial department.

Inorganic Strategy Priority and The Company Valuation Analysis of Pt Bank Bni Syariah to Become Buku III Bank

PT Bank BNI Syariah with a core capital of 4.4 trillion rupiahs, has a roadmap design to move up to BUKU III bank in 2020. One of the requirements to become a BUKU III bank is to have a core capital of 5 trillion rupiahs. With the current existing core capital, the company needs additional funding to meet those requirements. Inorganic Strategy is considered as the best option to add the company’s core capital. Using the Analytical Hierarchy Process (AHP) method, the author calculates the best possible Inorganic Strategy alternatives for the company, resulting in Initial Public Offering as the best alternatives. Thus, the company valuation is calculated to determine the fair value of the company for IPO. The company equity posture after IPO will be PT. Bank Negara Indonesia, Tbk. (79,95%), PT. BNI Life (0,05%) and public (20,00%). The company offered the share price at Rp 800 per share. Total equity gained after the public offering will be Rp 2,001 trillion, thus the new core capital of the company is Rp 6,4 trillion.