Does the EVA valuation model explain the market value of equity better under changing required return than constant required return?

Through the Economic-Value-Added(EVA)valuation model,the expected market value of equity can be determined by adding the book value of equity with the present value of expected EVAs under the assumption of constant required return and constant return on equity.The equation of EVA valuation model has taken its shape under the assumption of constant required return and constant return on equity.However,a large body of empirical evidence indicates that required rate of return never remain constant.The EVA-valuation model formulated under constant required return cannot be implemented under the scenario of changing required return.In this study,we explored whether the EVA valuation model could be implemented under changing required return by making any changes in the model and found that it could be implemented under the scenario of changing required return by replacing the book value of the equity of the existing model with the present value of required earnings or normal market earnings.We further examined whether the explanatory ability of the EVA valuation model under the assumption of changing required return is better than that of the valuation model under the assumption of constant required return.Relative information content analyses were conducted by considering sample of the intrinsic value of equities determined by valuation models and the market value of equities of 69 large-cap,88 mid-cap,and 79 small-cap companies.The results showed that the EVA-based valuation model with changing normal market return outperformed the EVA-based valuation model with constant required return.

Possibilities of Business Restructuring Under the Recession

The decrease in business activity and the fall in the production volume in the sectors of economy relying on long-term crediting is characteristic feature of the modern recessions. The pessimistic expectations of entrepreneurs concerning product demand leads to falling direct investment into business despite unlimited investment opportunities due to the developed capital markets nowadays. As a result it has created the opportunity for the development of such business restructuring types as mergers and acquisitions. Potential investors are different and their investment motivation is different, but the goal is the same--to increase the value of the business and its efficiency as a result of mergers and acquisitions. Utilizing borrowed capital for acquisitions of enterprises has many advantages. However, purchasable enterprises are exposed to several financial risk factors.

Company Value and Employee Satisfaction： Theoretical Analysis and Empirical Findings

Employee satisfaction and its potential impact on business and company success have been in the focus of organizational and managerial practise and research ever since. This paper outlines the theoretical framework of this particular cause-effect proposition, and further examines if there is empirical evidence to substantiate the underlying research hypothesis, saying that increasing degrees of employee satisfaction have a positive impact on the company value. The company value can be measured by the equity value of a firm. With the primary data analysis, the authors compared 11 companies which took part in the Great Place to Work （GPTW） Contest in 2007 and 2009 （only in 2009） regarding their equity values and GPTW scores. The figures of these companies were provided to the authors in an anonymous form. The authors had no influence on the number of companies the GPTW Institute provided to them. The GPTW Institute tried to find companies which attend both contests and also show their financial data in the ＂Elektronischen Bundesanzeiger＂. This paper aims to foster these results with some additional primary statistical analyses for hypothesis testing. For this investigation, the authors conducted various types of statistical procedures which seem to confirm the underlying proposition. With different types of correlation analysis, the relationship between equity value and GPTW score was elaborated. By regarding the absolute average Earnings Before Interest and Tax （EBIT） and equity value of the eleven out of the 100 best companies, some differences can be pointed out by setting them in comparison to 30 randomly selected companies from Germany.