How valuation approach choice affects financial analysts’ target price accuracy

This paper examines which valuation approaches financial analysts use to value a company and whether the chosen valuation approach affects the target price accuracy. To address these questions, we conduct content analyses of 867 hand-collected analyst reports on German publicly listed companies published between January 2014 and June 2017. We find that sell-side analysts more frequently use the single-period market approach when formulating target prices, followed by the multi-period income approach, and a mixture of both by combining the results, the so-called hybrid valuation approach. Additionally, we show that 612 of the analyzed analyst reports are based on a holistic valuation methodology instead of a sum of the parts valuation technique. Both univariate and multivariate analyses emphasize that the choice of valuation approach is significantly associated with the accuracy of price targets. Specifically, the income and market approach lead to significantly more accurate target prices compared to the hybrid approach. We also find that the target price accuracy is higher when analysts apply the holistic rather than the sum of the parts valuation approach to determine the fundamental value of the company. Additional results emphasize that target price accuracy improves when analysts use the sum of the parts valuation that bases solely on market or income approaches rather than hybrid approaches. Hence, we contribute to theory and practice by providing evidence on the link between the choice of valuation approach and the analysts’ target price accuracy as well as on the performance of certain valuation techniques.

Added value of sites suitable for sustainable office development

Valuations of real estate are widely used for various purposes and it relied always upon the financial and other markets. Valuation methodology is based on the operation of the free market economy and the real estate properties. The issue of certified properties is relatively new in the field of real estate valuation and is not sufficiently explored. Certified buildings are preferred by major corporate tenants with international field of activity who often have ethical rules for sustainable development. Therefore, certified properties are attractive to international commercial real estate investors who have higher purchasing power and are willing to pay a higher purchase price. Sustainable property certification is an element affecting the market value of the property. The purpose of this presented research is to quantify the impact of property certification on the value of office properties in Prague and subsequently to determine the impact of sustainability certificates on the market value of the land by using basic valuation techniques. The outcome of the project could be used by real estate valuation experts as a guideline to consider the future project certification and its impact on the land market value.

The Flow of Dividends to the Seller: Customs Valuation Methodology

The article is devoted to customs valuation methodology for foreign trade transactions run between related parties. It is proven that, in the conditions of a wide range of transfer pricing transactions, the actual sense of all costs and expenses of the buyer is vital. The study shows that, in determining the customs value, analysis of the business model in total, of the relationship between the parties, and of the real economic sense of various expenses is a must. Proposals for methodological approaches to customs valuation are developed and offered.

Beneficial Ownership Chain And Its Evaluation Arrangement

This paper presents a beneficial ownership chain. Nowadays international environment, there is an intensification of the movement of financial flows, which is inextricably linked to the checks on persons of business owners by the Controlling Authorities. Applying an effective valuation methodology and the availability of interconnected databases on corporate ownership becomes the only way to ensure the prosperity of business law and the ultimate beneficiary. Authors of the article consider the theoretical foundations of the conceptual framework of the final beneficial owner, which is a key link in the chain of ownership. The specification of the beneficial ownership chain and the methodology for calculating the beneficial property index are explained, and it proves the existence or absence of the final beneficiary.

Theoretical aspects of the effectiveness of economic damage assessment in the field of environmental auditing: problems and solutions

Aim. The aim of the research has been: to study the theoretical basis of the application of assessment of economic damage from environmental pollution in the field of environmental auditing and accounting, to identify problems in existing methods and approaches and to propose specific ways to solve them taking into account current legislation and international experience.Material and Methods. The research carried out by the authors was based on the provisions of current legal regulations in the fields of environmental safety and environmental protection, damage assessment in the environmental sphere together with data from scientific articles by both domestic and foreign experts in the field of environmental auditing. The study was conducted using theoretical methods of research including analysis, deduction and prediction.Results. The authors propose moving away from traditional cost (taxation) methods to the consolidation in regulatory practice of a single approach to the assessment of economic damage taking into account actuarial valuation methodology, application of sanctions instruments to those unscrupulously infringing environmental regulations and the possibility of discounting the costs of restoring the environment and damage done to public health.Conclusion. Adoption of common approaches and principles in the assessment of economic damage will help eliminate negative manipulations when imposing economic sanctions on those unscrupulously engaged in activities impacting on the environment and will provide an opportunity to improve the environmental situation and public health in the long term.

Smallholders’ Willingness to Pay for Mechanization (Tractor Services) in Delta and Benue States, Nigeria

ABSTRACT The majority of the smallholder farmers mainly used clue implements. However, the extent to which they are determined to change such practice remains unknown. This paper investigates the smallholders’ willingness to pay (WTP) for tractor services, factors that affect the smallholders’ WTP for tractor services as well as factors that affect the amount of money the smallholder is willing to pay for tractor services. Multi-stage sampling technique was used to collect data from 280 respondents in the study area. The contingent valuation methodology was used to measure the smallholders’ WTP. Descriptive statistics and the double hurdle model were used to analyse the results. The majority of the smallholder farmers were willing to pay for tractor-use. Age, farm size and location affect the smallholder’ WTP for tractor services. Expenditure and location affect the amount of money willing to pay for tractor services by the smallholder. There is a prospective growth for hired tractor services business due to smallholders’ WTP. It was suggested that entrepreneurs should invest in the business of tractor hired services since the farmers were willing to pay for their services. More researchers should be done on how to sustain the smallholders’ demand and WTP for tractor services.

Murabaha and Musharakah Moutanaquissah pricing: an interest-free approach

Purpose This study aims to provide an interest-free valuation methodology for Murabaha and Musharakah Moutanaquissah contracts. Indeed, In Islamic finance, Murabaha contracts are widely negotiated. Their yield depends mainly on the contracted profit margin. In the current practices, this latter is based on a reference interest rate, which is highly criticized in Islamic literature, just like Musharakah Moutanaquissah contracts. In this perspective, authors suggest a new valuation methodology with parameters related to the real economy. Design/methodology/approach The authors apply an indirect method to determine a lower bound of the profit margin of a Murabaha contract. Considering Musharakah Moutanaquissah as an equivalent contract, the new valuation methodology is based on participation and focuses on parameters from the real economy: the market rent and the rate of return used for an equivalent project. Findings The results show that the pricing of Musharakah Moutanaquissah contracts could be based on several parameters linked to the real economy. Consequently, an implied value of the profit margin could be computed. Also, the interest rate is no longer implicated in the pricing of neither Murabaha nor Musharakah Moutanaquissah contracts. Research limitations/implications The valuation methodology is applicable only if the underlying asset’s financing can be made with Murabaha and Musharakah Moutanaquissah contracts. Practical implications This work will restore the link between Islamic contracts and the real economy. For Islamic banks in particular, the suggested model would reduce the exposure to reputational risk and enhance the compliance to the Sharia (Islamic Law). Originality/value Several studies have analyzed the dependence between Islamic contracts and interest rates. In general, these studies confirm this dependence and few of them have suggested alternatives. Thus, the authors contribute to the literature by providing a practical and applicable model to detach the valuation of Murabaha and Musharakah Moutanaquissah from the interest rate.