Optimization of the capital structure of an agricultural company in the Czech Republic

The topic of optimizing capital structure is very important for a company to work efficiently and reliably. It is important for every company to optimize everything so that they have the highest possible efficiency. Entrepreneurs also try to make this optimization last them as long as possible. Therefore, the aim of this paper is to determine the optimal capital structure of an agricultural company operating in the Czech Republic. The base source of data is the closing data of individual agricultural companies from the Albertina database of Bisnode. More than 9,000 agricultural enterprises operating in the given sector of the national economy in the Czech Republic are recorded in this data set. The calculation of the WACC method and the level of debt of individual agricultural companies are used. Subsequently, the equation for calculating the cost of capital is determined using power regression. Here we also obtain the value of reliability, which in this particular case is not ideal, but still reasonable. A line chart is used to determine the optimal interval for the agricultural company. The optimal debt interval comes out to 20 to 25%, at which the cost of capital is declared to be from 22 to 24%. If agricultural companies had higher or lower debt ratios, it would be inefficient for the enterprise.

Pengaruh Biaya Modal dan Profitabilitas Terhadap Nilai Saham Bank BTPN Syariah Periode 2018-2020

Operations and investments of Islamic banks certainly require capital as the foundation and start of the bank's business, so estimating the cost of capital required is an important process and good corporate profits will provide a good image for the company. This study aims to determine the effect of capital with the Weighted Average Cost Of Capital (WACC) method on stock values. The effect of profitability with the ratio of Return On Equity (ROE) on stock value. And the effect of the cost of capital and profitability on the value of the stock. This study uses a descriptive quantitative research method. By using secondary data in the form of monthly financial statements of Bank BTPN Syariah for the 2018-2020 period. All of these data are materials for estimating and calculating the cost of capital and profitability of Bank BTPN Syariah. The results showed that partially the cost of capital had a significant positive effect on the stock value, profitability had a significant negative effect on the stock value. Meanwhile, simultaneously the cost of capital and profitability affect the value of the stock.

How to Determine the Cost of Capital for a Commercial Forestry

This paper focuses on designing a methodological workflow to fill a knowledge gap for determining the cost of capital for commercial forestry projects. Upon reviewing the literature, a method to determine the cost of capital for profit-oriented forestry seems to be lacking. Accordingly, we selected and analyzed 42 companies that do businesses worldwide, are present on the stock exchange, and possess or lease forest land. Based on their business activities (growing forest, sawmilling, final production, paper production), these companies are classified into four subgroups. An algorithm has been devised using the concept of risk diversification and the capital asset pricing model for three groups of investors and four forestry subgroups. In doing so, the real risk-free rate (0.43%) is set as the difference between an average return on 10-year US government bonds (2.59% nominal) and the 10-year average US inflation rate (2.16%). The measure of forestry systematic risk (beta coefficient) varies between 0.83 and 1.41, while the equity (stock exchange market) risk premium is set to 6%. Unsystematic risk is determined using a process of mapping which takes into account all risk elements marked as relevant for the forestry sector. This approach provides results that reveal the cost of capital varying between 5.41% and 16.55% based on the current level of an investor's portfolio diversification and the risk characteristics of the forestry subgroup. Finally, the forestry companies meeting the investor's expectations are noted as preferable investment opportunities.

Application of discounted cash flow model valuation: The case of Excide industries

Theoretical and practical features of the widely used discounted cash flow (DCF) valuation approach are examined in depth in this paper. This research evaluates Exide Industries by using the DCF Valuation technique. It is widely accepted that the discounted cash flow approach is an effective tool for analyzing the situation of an organization even in the most complicated circumstances. The DCF approach, on the other hand, is prone to huge assumption bias, and even little modifications in an analysis' underlying assumptions may substantially affect the valuation findings. As a result, of the sensitivity analysis, we discovered bullish, base, and worst-case scenarios with target share prices of Rs. 253.25, Rs. 171.37, and Rs.133.25, respectively, by adjusting growth and WACC (Weighted-Average Cost of Capital) values.

Family business valuation in emerging economies: the arcor case

Learning outcomes This case can be used to help students achieve the following objectives: To project financial statements and assemble different pieces of financial information to create a valuation model (objective #1, create), To calculate a value for Arcor shares, supporting the estimated value with the chosen assumptions and methodologies (objective #2, evaluate), To draw connections between four different approaches to valuation (DCF, EVA, RV and VI), contrasting them and weighting their advantages and limitations (objective #3, analyze), To examine the relationship between forecasted financial statements and valuation (objective #3, analyze), To discuss the calculation of the Weighted Average Cost of Capital in a new situation as is an emerging economy, with the corresponding country-risk adjustment (objective #4, apply), To discuss the sources of value creation in a family-owned private company in a developing economy (objective #4, apply), To understand the dilemma that the head of a company was facing, identifying the three possible financing alternatives discussed in the text as follows: corporate bonds, earnings reinvestment and an IPO (objective #5, understand). To recall basic facts, as the main character’s opinion on the direction of the local economy or the fact that Arcor already complies with the information requirements of a public company (objective #7, remember). Case overview/synopsis This case is based on the valuation of the world’s largest candy maker, Arcor S.A.I.C., originally a Latin American company, which remains a private family business. The key problem presented by the case is the use of different valuation approaches to price Arcor shares, in view of a possible Initial Public Offer. The case illustrates the application of four main valuation approaches as follows: Discounted Cash Flow (DCF), Economic Value Added (EVA), Relative Valuation (RV) and Value Investing (VI). Additionally, it includes a fundamental analysis of eight years of historical financial information and the preparation of forecasted financial statements. Set in a developing economy, the Arcor case introduces the complexities of calculating the cost of capital with the inclusion of country risk, as well as the financial analysis distortions caused by an environment of high inflation. Complexity academic level The Arcor case is appropriate to be used in graduate courses of Corporate Finance, Valuation or Private Equity. Supplementary materials Teaching notes are available for educators only. Subject code CSS 1: Accounting and Finance.

Capital market effects of adoption of IFRS

<p>This thesis examines the impact of adoption of IFRS (International Financial Reporting Standards) on two aspects of the operation of capital markets. Firstly, the impact of adoption of IFRS on financial reporting comparability, market liquidity, and cost of capital. Secondly, the impact of adoption of IFRS on seasoned equity offering (SEO) underperformance. To examine the impact of adoption of IFRS on financial reporting comparability, market liquidity, and cost of capital, the study used meta-analysis of empirical studies published since 2000. Meta-analysis provides an objective view of the empirical results, in contrast to narrative reviews, which offer subjective conclusions. From meta-analysis of 55 empirical studies with 1,259 effect sizes, the study finds that IFRS adoption has increased financial reporting comparability, market liquidity, and reduced cost of equity. For cost of debt, a decrease is observed only for voluntary adoption. The meta-regression analysis shows how the results differ across mandatory and voluntary adoption of IFRS and that the measurement choices, type of control variables, study design, and strength of empirical results explain the variation in the observed effect of adoption of IFRS. To examine the impact of adoption of IFRS on SEO underperformance the study analyses a large sample of SEOs from 51 countries over the period 1992-2017. Given that the empirical literature on SEOs has established that information asymmetry contributes to SEO underperformance, it is important to assess whether adoption of IFRS has reduced the uncertainties surrounding SEOs and, thus, subsequent underperformance. The study employs a control sample of non-IFRS adoption countries and applies a difference-in-difference (DiD) design to test for the incremental change for IFRS adoption countries over non-IFRS adoption countries. The study finds that SEO underperformance reduces for IFRS adopters relative to non-IFRS adopters in the post-adoption period. The reduction in SEO underperformance is influenced by increased disclosure, increased comparability, and number of accounting changes. The study also finds that the impact of adoption of IFRS on SEO underperformance exists only for firms in countries with strong enforcement, and is conditional on the implementation credibility of countries. The findings are robust to the application of a different measure of SEO underperformance. Overall, the study suggests that IFRS has had a positive impact on capital markets. However, increased disclosure, comparability, and credible implementation play important roles in realising the benefits of adoption of IFRS. Thus, policymakers of weak enforcement countries are encouraged to strengthen their institutional environment in order to reap the benefits that adoption of IFRS can provide to their capital market.</p>

Capital market effects of adoption of IFRS

<p>This thesis examines the impact of adoption of IFRS (International Financial Reporting Standards) on two aspects of the operation of capital markets. Firstly, the impact of adoption of IFRS on financial reporting comparability, market liquidity, and cost of capital. Secondly, the impact of adoption of IFRS on seasoned equity offering (SEO) underperformance. To examine the impact of adoption of IFRS on financial reporting comparability, market liquidity, and cost of capital, the study used meta-analysis of empirical studies published since 2000. Meta-analysis provides an objective view of the empirical results, in contrast to narrative reviews, which offer subjective conclusions. From meta-analysis of 55 empirical studies with 1,259 effect sizes, the study finds that IFRS adoption has increased financial reporting comparability, market liquidity, and reduced cost of equity. For cost of debt, a decrease is observed only for voluntary adoption. The meta-regression analysis shows how the results differ across mandatory and voluntary adoption of IFRS and that the measurement choices, type of control variables, study design, and strength of empirical results explain the variation in the observed effect of adoption of IFRS. To examine the impact of adoption of IFRS on SEO underperformance the study analyses a large sample of SEOs from 51 countries over the period 1992-2017. Given that the empirical literature on SEOs has established that information asymmetry contributes to SEO underperformance, it is important to assess whether adoption of IFRS has reduced the uncertainties surrounding SEOs and, thus, subsequent underperformance. The study employs a control sample of non-IFRS adoption countries and applies a difference-in-difference (DiD) design to test for the incremental change for IFRS adoption countries over non-IFRS adoption countries. The study finds that SEO underperformance reduces for IFRS adopters relative to non-IFRS adopters in the post-adoption period. The reduction in SEO underperformance is influenced by increased disclosure, increased comparability, and number of accounting changes. The study also finds that the impact of adoption of IFRS on SEO underperformance exists only for firms in countries with strong enforcement, and is conditional on the implementation credibility of countries. The findings are robust to the application of a different measure of SEO underperformance. Overall, the study suggests that IFRS has had a positive impact on capital markets. However, increased disclosure, comparability, and credible implementation play important roles in realising the benefits of adoption of IFRS. Thus, policymakers of weak enforcement countries are encouraged to strengthen their institutional environment in order to reap the benefits that adoption of IFRS can provide to their capital market.</p>

Government Environmental Pressure and Market Response to Carbon Disclosure: A Study of the Early Chinese ETS Implementation

We studied how companies’ carbon disclosures affect the cost of capital under the Chinese government’s introduction of the Emissions Trading Scheme (ETS) regulation. We also tested how much the effect varied between state-owned and private enterprises, and between polluting and non-polluting industries. Since, at its early stage, the market may perceive signals and implementations of environmental regulation as a cost burden, the effect of environmental disclosure, which is traditionally known to reduce the cost of capital, may be different. Using a comprehensive index through content analysis and targeting companies in China’s pilot ETS regions between 2011 and 2016, our study showed the following test results. First, for the companies in regions where the ETS regulation was introduced, while carbon disclosure was below a certain level, disclosure raised the cost of capital, and after carbon disclosure was sufficiently high, disclosure decreased the cost of capital. Second, this inverted-U-shaped relationship appeared in non-state-owned enterprises only, and state-owned enterprises showed a traditional linear relationship that disclosure lowers the cost of capital. Third, this non-linear relationship was statistically significant only in the non-heavy pollution industries. This study contributes to the literature in that there are limited studies on the market effects of China’s early introduction of the ETS regulation.

ESG-risk Factors and Value Multiplier of Telecommunications Companies

The paper is devoted to the study of the impact of environmental, social responsibility and corporate governance (ESG) risk factors on the value of telecommunications industry enterprises expressed through the EV_EBITDA multiplier. The main goal was to assess the elimination of ESG risks from the standpoint of increasing the competitiveness of the company. The methodological basis of the study was the coordination of non-financial information of companies with their financial results. The paper implements the construction of a regression model within the framework of econometric modeling, the direction of which was proposed by A. Damodaran. The authors did not limit themselves to corporate information from one country, but identified five regions, such as the USA, the European Union, the UK, the rest of the developed countries (DEV), as well as the markets of developing countries (EM). The database was compiled on the basis of non-financial business activity parameters of 57 of the world's largest telecommunications companies as of 2021, where financial information is taken from the Bloomberg database, and the ESG risk coefficient of the rating of these companies is used from the Sustainalytics research center. The result of the study was that there is a stable relationship between the risk of the ESG rating and the EV/EBITDA parameter characterizing the cost of capital – that is, the lower the risk, the greater the cost of capital. For different country groups, the result was obtained with varying degrees of confidence: for "other developed countries" with a high 5% significance level, for European countries with a 10% level, for the USA, the insignificance of the coefficient is associated with a small sample size, and for developing country markets the coefficient is insignificant. The novelty of the results obtained lies in the use of a metric approach to confirm the stable dependence of ESG risk factors on the EV/EBITDA cost multiplier. The results obtained allow us to make a generalized conclusion that the elimination of ESG risks contributes to the growth of the company's competitiveness, where the results of the study are able to encourage companies to consider the disclosure of non-financial information as an important indicator of long-term sustainability. When ESG is considered as an integral factor in the future activity of the company, the end result is its higher evaluation by stakeholders.