The methodology to assess the impact of corporate governance on the enterprise value

Abstract

Subject. The article investigates pricing factors that determine the enterprise value with respect to the effect of corporate governance factors. Objectives. I analyze the impact of corporate governance factors on the enterprise value and build a technique for assessing the effect of corporate governance on the business valuation of the Russian public companies. Methods. The study relies upon the synthesis, deduction, induction, methods of statistical analysis, comparison and generalization. Results. I devised the method, which comprises five steps considering the effect of corporate governance factors on the enterprise value. Following the steps of the method, the specifics of the valuation subject is analyzed in terms of business and legal forms, the use of modern Russian corporate governance principles, the composition and the number of shareholders, industry the entity operates in, and fundamental metrics of the enterprise value. Conclusions and Relevance. Currently, there is few information in the literature about the impact of corporate governance principles set forth in the 2014 Corporate Governance Code, on business value. The article presents the method for assessing the impact of corporate governance on the business valuation, which accounts for the specifics of business and legal forms in terms of corporate governance principles, capital structure, the number of shareholders, the State’s involvement, industry, and fundamental metrics of business valuation. The proposed method can be used by financial analysts, appraisers, corporate managers so as to build and manage the enterprise value.