Changes In Valuation Research Articles

The influence of CEO duality and board size on the market value of spun-off subsidiaries

PurposeCorporate spin-offs have become more popular as a restructuring technique in recent decades. The market performance of these spun-off subsidiaries has been considered critical, as positive market signals are vital to the success of these newly independent firms. Drawing on both the stewardship and resource dependence theories, this study aims to examine how two critical governance characteristics (namely, CEO duality and board size) affect the change in the market valuation of spun-off subsidiaries. This study proposes that both board size and CEO duality of spun-off subsidiaries should positively influence the change in market valuation.Design/methodology/approachThis study used the SDC Platinum database to identify completed corporate US spin-offs between 2000 and 2014. To ensure consistency across spin-off events, this study included only those in which 100 percent of outstanding shares of spun-off subsidiaries were distributed. The study confirmed the SDC Platinum listings using online resources such as The Wall Street Journal and Lexis/Nexis. The study used weighted least square (WLS) regression to test all the proposed models.FindingsThis empirical analysis of 134 US-based spin-offs supported both main hypotheses. Furthermore, the analysis also finds that firm size has significant moderating effects on the link between governance structure and market performance.Originality/valueThese findings contribute to the governance literature on corporate spin-offs by advancing our understanding of the role of CEO and board characteristics in improving these subsidiaries' market valuation, as well as the moderating effect of the firm size.

Strengthened Default Mode Network Activation During Delay Discounting in Adolescents with Anorexia Nervosa After Partial Weight Restoration: A Longitudinal fMRI Study.

The capacity of patients with anorexia nervosa (AN) to resist food-based rewards is often assumed to reflect excessive self-control. Previous cross-sectional functional magnetic resonance imaging (fMRI) studies utilizing the delay discounting (DD) paradigm, an index of impulsivity and self-control, suggested altered neural efficiency of decision-making in acutely underweight patients (acAN) and a relative normalization in long-term, weight-recovered individuals with a history of AN (recAN). The current longitudinal study tested for changes in functional magnetic resonance imaging (fMRI) activation during DD associated with intensive weight restoration treatment. A predominately adolescent cohort of 22 female acAN patients (mean age—15.5 years) performed an established DD paradigm during fMRI at the beginning of hospitalization and again after partial weight restoration (≥12% body mass index (BMI) increase). Analyses investigated longitudinal changes in both reward valuation and executive decision-making processes. Additional exploratory analyses included comparisons with data acquired in aged-matched healthy controls (HC) as well as probes of functional connectivity between empirically identified nodes of the “task-positive” frontoparietal control network (FPN) and “task-negative” default-mode network (DMN). While treatment was not associated with changes in behavioral DD parameters or activation, specific to reward processing, deactivation of the DMN during decision-making was significantly less pronounced following partial weight restoration. Strengthened DMN activation during DD might reflect a relative relaxation of cognitive overcontrol or improved self-referential, decision-making. Together, our findings present further evidence that aberrant decision-making in AN might be remediable by treatment and, therefore, might constitute an acute effect rather than a core trait variable of the disorder.

STRANDED ASSETS AND SOVEREIGN STATES

There is evidence that the risk of stranded assets in the oil and gas sector is underpriced in financial markets. Publicly traded Western oil and gas companies are starting to write down assets, opening up the possibility that more rationalisation of value is likely to come. To the extent that large oil companies diversify portfolios to include cleaner energy and carbon sequestration technologies, it could reduce the risk of a sudden cascading change in the stock valuation of these firms and related bond and credit markets. Instead, the vast majority of oil and gas assets that will be stranded are in the control of sovereign states whose national budgets are highly dependent on oil and gas revenues. Thus, the problem of stranded asset risk for the oil and gas sector may be most relevant in markets for sovereign credit as well as risks that go beyond financial losses.

Are lodging revenue cycles leading indicators for shifts in financial well-being?

The study contributes a natural experiment on the impact of tourism destination visit dynamic on national financial well-being. The study tracks the weekly rate of change in lodging demand in a top-ten U.S. vacation destination by visitor count, the Myrtle Beach area (“Grand Strand”), South Carolina The study covers a fifteen-year period on the relative strength of business valuation as measured by the Dow Industrial Index. The findings suggest that trends in lodging industry performance in a leisure travel destination such as the Myrtle Beach area may be a leading indicator of change in business valuation at the national level. In reporting on limitations, natural experiments need to include discussions of sources of invalidity such as the sources that appear in this study.

Patient characteristics and valuation changes impact quality of life and satisfaction in total knee arthroplasty \u2013 results from a German prospective cohort study

BackgroundEvaluation of variations in pre- and postoperative patient reported outcomes (PRO) and the association between preoperative patient characteristics and health and satisfaction outcomes after total knee arthroplasty (TKA) may support shared decision-making in Germany. Since previous research on TKA health outcomes indicated valuation differences in longitudinal data, experienced-based population weights were used for the first time as an external valuation system to measure discrepancies between patient and average population valuation of HRQoL.MethodsBaseline data (n = 203) included sociodemographic and clinical characteristics and PROs, measured by the EQ-5D-3 L and WOMAC. Six-month follow-up data (n = 161) included medical changes since hospital discharge, PROs and satisfaction. A multivariate linear regression analysis was performed to evaluate the relationship between preoperative patient characteristics and PRO scores. Patient acceptable symptom state (PASS) was calculated to provide a satisfaction threshold. Patient-reported health-related quality of life (HRQoL) valuations were compared with average experienced-based population values to detect changes in valuation.ResultsOne hundred thirty-seven subjects met inclusion criteria. All PRO measures improved significantly. Preoperative WOMAC and EQ-5D VAS, housing situation, marital status, age and asthma were found to be predictors of postoperative outcomes. 73% of study participants valued their preoperative HRQoL higher than the general population valuation, indicating response shift. Preoperatively, patient-reported EQ-5D VAS was substantially higher than average experienced-based population values. Postoperatively, this difference declined sharply.Approximately 61% of the patients reported satisfactory postoperative health, being mainly satisfied with results if postoperative WOMAC was ≥82.49 (change ≥20.25) and postoperative EQ-5D VAS was ≥75 (change ≥6).ConclusionOn average, patients benefited from TKA. Preoperative WOMAC and EQ-5D VAS were predictors of postoperative outcomes after TKA. Particularly patients with high absolute preoperative PRO scores were more likely to remain unsatisfied. Therefore, outcome prediction can contribute to shared-decision making. Using general population valuations as a reference, this study underlined a discrepancy between population and patient valuation of HRQoL before, but not after surgery, thus indicating a potential temporary response shift before surgery.

Valuation effects of capital inflows: Evidence from emerging market economies

This paper studies valuation changes of capital inflows in 19 emerging market economies (EMEs). In most of the EMEs, we find that there are significant valuation changes and a positive rate of return on external liabilities by foreigners. Furthermore, the nonlinear effects of exchange rate movements on valuation changes are investigated using panel smooth transition regression models. Empirical results show that the transition is centered at approximately −22.3% of exchange rate change, which implies that when the exchange rate appreciates more than this level, foreign investment value gains increase considerably.

How do consumers in the sharing economy value sharing? Evidence from online reviews

With the rapid development of information technology, platform-facilitated collaborative consumption has recently become attractive to consumers. A comparative study of consumers' online review behavior and its impact on overall satisfaction and demand in the accommodation-sharing economy and the hotel industry indicates that consumers' perceptions and behavior change gradually with changes in the level of sharing—from no sharing when staying in hotel rooms to intensive sharing when sharing rooms through collaborative consumption. Online consumer reviews focus on product and service attributes, and the influential factors of customer satisfaction and demand differ when consumers are at different accommodation-sharing levels. Not all attributes described in online reviews influence overall customer satisfaction. With a higher level of sharing, consumers' valuation changes from more to less tangible attributes. Consumers at a higher sharing level care more about social interaction and economic value than consumers at a lower sharing level. Transaction costs, particularly the information search and acquisition costs, play an important role in influencing customer purchase decisions in the sharing economy. Consumers refer to direct information for tangible attributes and to previous consumers' online reviews for intangible attributes to familiarize themselves with details before making purchase decisions. Our study provides implications that help platforms and hosts better target consumer segments with different sharing levels and more effectively utilize online reviews to generate positive electronic word of mouth to enhance consumer demand and the performance of platform economics.

Geoinformation Analysis of Investment Land Attraction of City

In this work, a sequence of application of geoinformation systems was developed for the assessment and analysis of integrated indicators of potential investment land attractiveness of cities taking into account changes in normative monetary valuation of settlements. It is shown that the use of GIS allows to visualize geospatial data and ensure communication of the obtained indicators with the input information. The potential investment land attractiveness of regional centers and identified cities whose land needs to increase investment attractiveness has been analyzed. A GIS-map was constructed based on indicators of potential investment land attractiveness of cities taking into account changes in the normative monetary valuation of settlements, which provides the basis for its monitoring.

Valuation changes associated with the FOX/Disney divestiture transaction

Valuation changes associated with the FOX/Disney divestiture transaction

Does an improved type of reporting lead to a better financial performance?

Research question: Is there a link between the type of report that a company publishes and its financial performance? Motivation: I draw on previous research that analyses the impact of integrated reporting on the firm’s valuation (Arguelles et al., 2015; Lee & Yeo, 2016; Barth et al., 2017; Zhou et al., 2017; Cosma et al., 2018) conducted mainly on South African samples (where integrated reporting is a mandatory practice) in order to develop an idea for future research based on early practices, a wider geographical distribution and an industry frequently eliminated from this type of studies. Idea: This paper aims to examine whether there is an association between publishing an improved type of report (e.g. integrated report) and financial performance indicators. Data: There were considered the 2013 and 2014 reports of 22 insurance companies listed to a stock exchange. Tools: There were applied different regressions with various variables (report type, integrated report, company size, leverage, return on assets, return on equity, Tobin’s Q and sustainability ranking) using the data sourced manually from the companies’ reports. Findings: Naming the 2013 report as “integrated” leads to changes in firm valuation (a positive and significant association between integrated report variable and Tobin’s Q), but does not cause improvements in terms of profitability (ROA or ROE). Contribution: This study contributes to the literature that examines the benefits of integrated reporting, without considering only mandatory cases and in the context of an influential industry, often eliminated from other studies.

Myths Exposed on what controls Base Metals and Gold Prices

Accurate forecasts for medium-term commodity prices and exchange rates are essential for resource companies considering commitment to large capital expenditures. The inaccuracy of traditional forecasting methods is well known because they tend to be extrapolations of the current trend. The inevitable reversal catches too many companies by surprise. I show commodity medium term prices are not strongly linked to economic health, instead are controlled in an inverse sense by valuation changes of the United States dollar. A probabilistic projection for future valuations of the United States dollar is presented, based on the successful analytical techniques of the petroleum exploration industry. I show the United States dollar is significantly undervalued at present. The probabilistic extrapolation of the US dollar valuation indicates likely appreciation will put downward pressure on commodity prices for the next 2-5 years - base metals P50 price likely to average around 40% lower than start of 2010; gold P50 average of USD 500.

Why did the equity home bias fall during the financial panic of 2008?

AbstractInvestors tend to put most of their wealth in local stocks; theories of portfolio choice and uncertainty aversion jointly predict that this home bias should increase during a financial crisis. Yet, using a sample of 45 countries, I document that the equity home bias fell during the financial panic of 2008. Exploiting bilateral stock holdings, I find that investors actively increased their home bias, but large valuation changes subsumed these trades. Across countries, the change in home bias is consistent with partial portfolio rebalancing and increased information asymmetries during the crisis.

Carbon Beta - A Framework for Determining Carbon Price Impacts on Valuation

Greenhouse gas (GHG) emissions create a cost liability for firms exposed to the implementation of carbon pricing. We propose a framework for public equities that links Scope 1 and Scope 2 emissions with changes in firm valuation. This framework considers both 1) larger operating costs that lead to a decrease in value as well as 2) new revenues generated by “green” sales that increase the value of firms. From an initial carbon tax “shock”, we distribute the tax costs across market sectors based on Scope 1 emissions and estimate higher electricity costs based on Scope 2 emissions. In addition, we consider an increase in revenues for companies generating solutions for mitigation of GHG emissions. The framework relies on a host of assumptions that we outline and test through sensitivity analysis. We find negative price responses in four sectors: Energy, Utilities, Materials and Transportation, while we find positive price responses in several sectors including Automobiles, Software and Capital Goods.

Pricing On-Demand Services: How Best to Combine Access and Usage Fees?

Common pricing plans for pricing digital goods and services that are consumed in multiple units repeatedly over time include a simple per-unit plan (also called pay as you go or usage-based pricing), a per-period plan (all you can eat buffet or membership pricing), and a combination of the two via either a two-part tariff (2PT) that imposes both fees on all buyers or a self-selection menu that allows buyers to pick one type of fee. Although the latter two plans combine the two fees in very disparate ways, we find that both plans generate roughly the same profit, with each having only a small advantage under different conditions. Crucially, though, the menu has a significant advantage on market coverage. We show that in heterogeneous markets the profit advantage of two-instrument plans over an appropriate single instrument plan (the best of per-unit and per-period) is most significant when satiation-rates (rate of change in marginal valuation) are similar across consumers. Otherwise, an appropriate single instrument plan does a reasonable job of balancing profitability and tariff complexity. When the firm wants to implement a `simple' single-instrument plan but is uncertain about satiation-rates then employing a per-unit plan is less risky because on average it is more profitable compared to a per-period plan. The per-unit plan also generates higher market coverage compared to the per-period plan across the spectrum of scenarios.

Citizen Attitudes Toward Traditional and State Authorities: Substitutes or Complements?

Do citizens view state and traditional authorities as substitutes or complements? Past work has been divided on this question. Some scholars point to competition between attitudes toward these entities, suggesting substitution, whereas others highlight positive correlations, suggesting complementarity. Addressing this question, however, is difficult, as it requires assessing the effects of exogenous changes in the latent valuation of one authority on an individual’s support for another. We show that this quantity—a type of elasticity—cannot be inferred from correlations between support for the two forms of authority. We employ a structural model to estimate this elasticity of substitution using data from 816 villages in the Democratic Republic of Congo and plausibly exogenous rainfall and conflict shocks. Despite prima facie evidence for substitution logics, our model’s outcomes are consistent with complementarity; positive changes in citizen valuation of the chief appear to translate into positive changes in support for the government.

A vida móvel das mulheres entre os bairros e as cidades: explorações antropológicas em fronteiras urbanas da Região Metropolitana de Belo Horizonte (Minas Gerais/Brasil)

O artigo apresenta os resultados preliminares de pesquisa antropológica em dois bairros da Região Metropolitana de Belo Horizonte, na qual os deslocamentos são descritos analiticamente como práticas de movimento situadas no espaço social, atentando para os efeitos de gênero e local de moradia nos trajetos dos sujeitos nas cidades. Os bairros do Jardim Canadá e Água Limpa estão localizados ao longo da estrada BR-040, onde existem residências e serviços que atendem às classes médias e a grupos de menor renda. Nesse contexto heterogêneo de expansão urbana, enfoca-se a mobilidade de mulheres e seus familiares que migraram de outros locais e hoje realizam viagens rotineiras para cumprir responsabilidades de trabalho e de cuidado. As práticas de mobilidade serão pensadas em relação ao contexto metropolitano e às modulações valorativas associadas ao movimento em busca da vida melhor e da cidade possível, relacionando as trajetórias dos indivíduos ao espaço-tempo das fronteiras urbanas.

Mice learn to avoid regret

Regret can be defined as the subjective experience of recognizing that one has made a mistake and that a better alternative could have been selected. The experience of regret is thought to carry negative utility. This typically takes two distinct forms: augmenting immediate postregret valuations to make up for losses, and augmenting long-term changes in decision-making strategies to avoid future instances of regret altogether. While the short-term changes in valuation have been studied in human psychology, economics, neuroscience, and even recently in nonhuman-primate and rodent neurophysiology, the latter long-term process has received far less attention, with no reports of regret avoidance in nonhuman decision-making paradigms. We trained 31 mice in a novel variant of the Restaurant Row economic decision-making task, in which mice make decisions of whether to spend time from a limited budget to achieve food rewards of varying costs (delays). Importantly, we tested mice longitudinally for 70 consecutive days, during which the task provided their only source of food. Thus, decision strategies were interdependent across both trials and days. We separated principal commitment decisions from secondary reevaluation decisions across space and time and found evidence for regret-like behaviors following change-of-mind decisions that corrected prior economically disadvantageous choices. Immediately following change-of-mind events, subsequent decisions appeared to make up for lost effort by altering willingness to wait, decision speed, and pellet consumption speed, consistent with past reports of regret in rodents. As mice were exposed to an increasingly reward-scarce environment, we found they adapted and refined distinct economic decision-making strategies over the course of weeks to maximize reinforcement rate. However, we also found that even without changes in reinforcement rate, mice transitioned from an early strategy rooted in foraging to a strategy rooted in deliberation and planning that prevented future regret-inducing change-of-mind episodes from occurring. These data suggest that mice are learning to avoid future regret, independent of and separate from reinforcement rate maximization.

Self-Image and Hypothetical Bias in Willingness to Pay Elicitation: The Case of a Private Good

Stated willingness-to-pay from hypothetical surveys generally exceeds revealed willingness-to-pay from real purchase experiments. One explanation for this hypothetical bias which has been put forward is that participants use high willingness-to-pay statements for public goods to improve their moral self-image. This paper formalizes the argument by building on the reputation model of Benabou and Tirole (2006) and extends it to private goods by applying the concept of ideal self-congruity from consumer research. In the resulting theory people enhance their self-image by showing support for a desired product image. The comparative statics effects for changes in the intrinsic valuation of a good and self-image concerns derived from the formal model are tested in a 2x2 between subject design with 395 participants and a private good. The results indicate that higher self-image concerns lead to an increase in the hypothetical bias while greater valuation for the good leads to a decrease in the bias.

Household Wealth & the Net International Investment Position

Aggregate household wealth dynamics are closely associated with fluctuations of the economy. However, the linkages between household wealth dynamics and cross-border financial holdings have remained unexamined. Thanks to the recent assembly of an essential dataset, this paper assesses these co-movements in selected advanced economies. We establish that increases in net household wealth are associated with deteriorations of the Net International Investment Position (NIIP). This pattern is primarily driven by valuation changes in wealth (mostly through house price appreciation). Overall, we find that capital gains on household wealth are strongly related to the accumulation of net external debt liabilities, a key indicator of financial vulnerability.

Nonlinear Pricing of Software with Local Demand Inelasticity

Nonlinear usage-based pricing is applied extensively in software markets. Customers of software products usually cannot vary their required usage volume, a property we label local demand inelasticity. For instance, a client firm that needs a sales force automation software either buys one user license for every salesperson or does not buy at all. It is unlikely to buy licenses for some but not all salespersons. This demand feature violates a critical assumption of the standard nonlinear pricing literature that consumers are flexible with their usage volume, and their valuation changes smoothly with usage volume. Consequently, standard nonlinear pricing solutions are inapplicable to many software products. This paper studies the optimal nonlinear usage-based pricing of software when customers' demand is locally inelastic. This unique demand feature necessitates a new approach to solve the nonlinear pricing problem. We show that under a weak ordering condition of customer types, this complex pricing problem can be decomposed into a set of much simpler subproblems with known solutions. Our pricing solution is easily implementable and applicable to a broad range of demand systems, including those described by the families of exponential and normal distributions. Moreover, local demand inelasticity has a critical impact on key efficiency results.