Changes In Valuation Research Articles

Finland's Public Sector Balance Sheet: A Novel Approach to Analysis of Public Finance

We construct a comprehensive public sector balance sheet for Finland from 2000 to 2016 by complementing general government statistics with data on public corporations and public pensions. We show that exposure to valuation changes in equity markets through asset holdings and increases in pension liabilities relative to GDP amplify crisis impacts on public finances. We expand the balance sheet by including present value estimates of future fiscal flows; this allows us to perform fiscal stress tests and policy experiments. These analyses suggest that Finland's public finances will remain sound provided ongoing reform and consolidation efforts to address aging pressures are implemented as planned.

A User's Guide to BPM6-Based BOP and IIP Accounts

This note presents a short description of BPM6-based balance of payments (BOP) and international investment position (IIP) data. It works through examples using data for the United States and Mexico while providing guidance for understanding the data of just about any country. Excerpt UVA-GEM-0154 Rev. Jan. 7, 2021 A User's Guide to BPM6-Based BOP and IIP Accounts This note presents a short description of balance of payments (BOP) and international investment position (IIP) data. It refers to data for the United States and Mexico, but given that there are worldwide standards for countries that report BOP and IIP, it provides guidance for understanding the data of just about any country. The BOP accounts record international transactions (flows within a period of time), whereas the IIP records financial positions (stocks accumulated over time, reported as end-of-period values). In theory, there should be a straightforward link between the two. The BOP concerns the current account (trade in goods and services, plus remittance flows and income streams from international positions) and the transactions that finance it. The financing transactions the so-called capital flows result in cross-border positions in equities, debt, and other investment vehicles, and those positions are what make up the IIP. The position (or IIP) from year to year should evolve according to flows recorded in the BOP plus valuation changes (due to price and exchange rate movements). Individual countries publish their own BOP and IIP data, but the easiest place to find the data is in various International Monetary Fund (IMF) databases available at . The IMF not only brings together BOP and IIP data for more than 100 countries, but it also ensures consistency in the presentation of the data and creates global standards for BOP and IIP reporting. IMF guidelines change infrequently; when they do, countries try (to various degrees) to restructure data collection systems so that data can be produced according to the current set of global guidelines. This note is based on the current set of guidelines, which were codified in the sixth edition of the IMF's Balance of Payments Manual (BPM6), which was released in November 2013. . . .

Private Company Valuations by Mutual Funds

Mutual funds value private security holdings at considerably different prices, update evaluations infrequently, and revise valuations dramatically at follow-on funding events. Predictable private valuation changes at follow-on rounds yield predictable fund returns, but effects are muted for large families, families with large investment in the private security, and families with large percentage stakes in funding rounds. Mutual funds with high exposure to private securities have outflows that are more sensitive to poor fund performance when the venture capital market also performs poorly. The results have welfare implications for retail investors interested in accessing private startups via investments in mutual funds.

Intertemporal Price Discrimination with Time-Varying Valuations

A firm that sells a non perishable product considers intertemporal price discrimination in the objective of maximizing the long-run average revenue. Each period, a number of interested customers approach the firm and can either purchase on arrival, or remain in the system for a period of time. During this time, each customer's valuation changes following a discrete and homogenous Markov chain. Customers leave the system if they either purchase at some point, or their valuations reach an absorbing state v0. We show that, in this context, cyclic strategies are optimal, or nearly optimal. When the pace of intertemporal pricing is constrained to be comparable to customers patience level, we have a good control on the cycle length and on the structure of the optimizing cyclic policies. We also obtain an algorithm that yields the optimal (or near optimal) cyclic solutions in polynomial time in the number of prices. We cast part of our results in a general framework of optimizing the long-run average revenues for a class of payoffs that we call weakly coupled, in which the revenue per period depends on a finite number of neighboring prices.

Finland's Public Sector Balance Sheet: A Novel Approach to Analysis of Public Finance

We construct a comprehensive public sector balance sheet for Finland from 2000 to 2016 by complementing general government statistics with data on public corporations and public pensions. We show that exposure to valuation changes in equity markets through asset holdings and increases in pension liabilities relative to GDP amplify crisis impacts on public finances. We expand the balance sheet by including present value estimates of future fiscal flows; this allows us to perform fiscal stress tests and policy experiments. These analyses suggest that Finland’s public finances will remain sound provided ongoing reform and consolidation efforts to address aging pressures are implemented as planned.

Możliwości wykorzystania geoportali regionalnych w rozwoju rolnictwa na przykładzie Geoportalu Województwa Łódzkiego = Possibility of using regional geoportals in agricultural development on the example of the Łódzkie Voivodeship Geoportal

The aim of this article is to present the usage of spatial information infrastructure in agricultural activity. The spatial information infrastructure is understood as spatial datasets, which are available via web-based mapping application. Example of the Łódzkie Voivodeship Geoportal (www.geoportal.lodzkie.pl) was considered. The formal basis for the construction of the spatial information infrastructure in the European Union is the INSPIRE Directive, which was transposed in Poland by the means of the Act on spatial information infrastructure. According to the Polish law, numerous scattered institutions are responsible for spatial datasets. For example, the district geodetic and cartographic resources include i.a., the Land and Building Register. The regional geodetic and cartographic resources includes i.a., the Topographic Database at scale of 1:10 000, geodetic and cartographic materials related to: analysis of agrarian structure changes, programming and coordination agriculture works and monitoring changes in land use and soil valuation. The central resources include i.a, orthophotomaps, digital terrain model, soil and agricultural maps. Distributed “leading bodies” are responsible for topics related to agriculture, such as: land parcels, terrain layout, land use, ortho-images, geology, soil and spatial development. The national, regional and county geoportals are web map applications, which operate as access points to network services presenting distributed spatial datasets. They provide improved access to reliable and complete information on voivodeship’s area for all citizens, companies and institutions, including those related to agriculture.

Coordination problems in cryptomarkets: Changes in cooperation, competition and valuation

The new drug markets emerging on the dark net have reduced earlier drug market risk factors such as visibility and violence. This study uses economic sociology and transaction cost economics to broaden the present understanding of cryptomarkets. Results focus on three coordination problems characterizing illegal markets and how they are alleviated in cryptomarkets. More information and better visibility increase competition, the feedback system enforces cooperation and border control introduces a new cost influencing valuation. Cryptomarkets are formally structured and regulated by rules of conduct and centralized decisions. We argue that the online context circumvents earlier coordination problems in illegal markets, making dark net markets more structurally efficient compared with conventional drug markets.

The Term Structure of Risk Premia with Heterogeneous Recursive Preferences and Beliefs

I investigate the effect of preference and belief heterogeneity on the term structure of risk premia in a continuous-time time economy with Epstein-Zin-Weil preferences. The slope of the term structure of equity risk premia is driven by heterogeneity in the agents' own prices of risk and the sensitivity of the equity market valuation to the changes in economic conditions. As a result, the slope can switch its sign in response to a significant shock to the aggregate consumption. Significant negative shocks shift the consumption and wealth toward the more agent i.e. the agent with a higher risk aversion or more pessimistic beliefs. As a result, the equity market valuation changes from being pro-cyclical to counter-cyclical, which inverts the term structure. Thus, the model can generate a switch in the sign of the slope of the term structure of the dividend strip risk premia after the 2008-2009 global financial crisis, a result consistent with recent empirical studies and my own calibration based on a proprietary dataset of dividend swap prices.

An Analysis of how Financial Ratios of Companies in Turkey Are Affected by National Standards, and IFRS

Adoption in 2005 of IAS/IFRS by Turkish listed companies resulted in changes in classification, valuation and disclosure of financial items. This paper makes accessible to non-Turkish speakers a detailed investigation of the results from previous ratio analysis studies identified by Balsari & Varan (Balsari & Varan, 2014), in addition to presenting a more extensive analysis than Cengiz (Cengiz, 2014). Eight financial ratios have been analysed before and after implementation of international standards. One set of results compares the periods 2002-2003 with 2005-2006; and the other 2004 with 2005. The companies investigated are substantially the same in both analyses, but different versions of national standards are compared against international standards. Significant differences in average Book Value of Equity per Share are found after implementation of international standards for both sets of comparisons; and for one set only, at a lower confidence level, significant differences are indicated in the leverage ratio. The major contribution of the paper is the analyses of the differences during the pre and post implementation of international standards.

Modern Őmie Women: Virtual Indigeneity and Intimations of Empowerment

The women of Őmie Artists, a cooperative that produces original bark cloth paintings for the global indigenous art market, are described in contemporary ethnographic publications as ranked into a hierarchy of chiefs on the basis of their ‘wisdom’ which is expressed in their paintings. This depiction of the Őmie, who comprise a marginalized population of less than 2000 in Oro Province of Papua New Guinea, is dramatically different from what was known of their culture several decades ago. An assessment of the likelihood of this virtual depiction reflecting the social empowerment of Őmie women is undertaken. Although the impact of missionization and entry into capitalist markets is recognized, it is the interpellation of the art market of the ‘indigenous artist’, working within a traditional mystical tie with the land and the ancestors, which must be seen as precipitating what appears in virtual form an amplification and cultural embellishment of women’s traditional knowledge and practices. This process is foregrounded against the historical change in valuation of women’s cultural contributions by the discipline and the art world.

Persuasion, Influence, and Value: Perspectives from Communication and Social Neuroscience.

Opportunities to persuade and be persuaded are ubiquitous. What determines whether influence spreads and takes hold? This review provides an overview of evidence for the central role of subjective valuation in persuasion and social influence for both propagators and receivers of influence. We first review evidence that decisions to communicate information are determined by the subjective value a communicator expects to gain from sharing. We next review evidence that the effects of social influence and persuasion on receivers, in turn, arise from changes in the receiver's subjective valuation of objects, ideas, and behaviors. We then review evidence that self-related and social considerations are two key inputs to the value calculation in both communicators and receivers. Finally, we highlight biological coupling between communicators and receivers as a mechanism through which perceptions of value can be transmitted.

Two Types of Factors: A Return Decomposition for Factor Portfolios

The author decomposes the returns of quantitative long–short factor portfolios to those attributable to “fundamental return”—the return due to underlying business operations—and those attributable to “multiple expansion”—the return due to the change in the market valuation of those businesses. He does so by aggregating the statistics of the underlying stocks held in each leg of the portfolios over their respective holding periods. The author identifies two types of factors differentiated by the source of performance. The first type, of which the value factor is an example, outperforms because it identifies businesses whose valuations are subsequently bid up relative to the market; and despite that, it invests in “bad” businesses, or those that subsequently grow capital by less than average. In other words, its outperformance is entirely attributable to market behavior. The second type, of which momentum and quality (gross profitability to assets) are examples, outperforms because it identifies “good” businesses, or those that subsequently grow capital by more than average, and despite investors subsequently lowering their relative valuations.

Escalated cocaine "binges" in rats: enduring effects of social defeat stress or intra-VTA CRF.

Exposure to intermittent social defeat stress elicits corticotropin releasing factor (CRF) release into the VTA and induces long-term modulation of mesocorticolimbic dopamine activity in rats. These adaptations are associated with an intense cocaine-taking phenotype, which is prevented by CRF receptor antagonists. The present studies examine whether infusion of CRF into the VTA is sufficient to escalate cocaine-taking behavior, in the absence of social defeat experience. Additionally, we aimed to characterize changes in cocaine valuation that may promote binge-like cocaine intake. Male Long-Evans rats were microinjected into the VTA with CRF (50 or 500ng/side), vehicle, or subjected to social defeat stress, intermittently over 10days. Animals were then trained to self-administer IV cocaine (FR5). Economic demand for cocaine was evaluated using a within-session behavioral-economics threshold procedure, which was followed by a 24-h extended access "binge." Rats that experienced social defeat or received intra-VTA CRF microinfusions (50ng) both took significantly more cocaine than controls over the 24-h binge but showed distinct patterns of intake. Behavioral economic analysis revealed that individual demand for cocaine strongly predicts binge-like consumption, and demand elasticity (i.e. α) is augmented by intra-VTA CRF, but not by social defeat. The effects of CRF on cocaine-taking were also prevented by intra-VTA pretreatment with CP376395, but not Astressin-2B. Repeated infusion of CRF into the VTA persistently alters cocaine valuation and intensifies binge-like drug intake in a CRF-R1-dependent manner. Conversely, the persistent pattern of cocaine bingeing induced by social defeat stress may suggest impaired inhibitory control, independent of reward valuation.

Reversals of impairment charges under IAS 36: evidence from Malaysia

We report that firms reversing impairments under IAS 36 are not more incentivized to engage in earnings management and do not actually engage in more earnings management than a control sample matched on size and industry. We observe that reversals are positively associated with stock market valuation changes but not with future operating performance. Bifurcating our reversal firms into earnings managers and other firms, we report that the impairment reversals of the latter are positively associated with future firm performance and current stock market returns, while those of the former are negatively associated with future operating performance and are unrelated to stock valuation. Thus, while on average impairment reversals are undertaken in an unbiased manner, a minority of firms exploit the latitude provided by this fair value accounting standard to manage earnings upward. This research provides useful information to accounting standard setters pertaining to the adoption of fair value accounting methods. It also assists investment analysts by demonstrating how to detect opportunistic reversals of impairments.

Current Account Deficits During Heightened Risk: Menacing or Mitigating?*

Large current account deficits, and the corresponding reliance on capital flows from abroad, can increase a country's vulnerability to periods of heightened risk. We develop a framework to evaluate such vulnerabilities and clarify which characteristics of a country's international investment portfolio determine whether a current account deficit is ?menacing’ or ?mitigating’. Financial factors, namely international investment income and valuation changes on international investments, are critical. Our framework explores how domestic and global risk shocks affect these factors. An application to 10 OECD economies shows that a substantial degree of international risk sharing can occur through current accounts and international portfolios.

The drivers of multinational enterprises' climate change strategies: A quantitative study on climate-related risks and opportunities

The literature on business responses to climate change until now identified several drivers: regulatory changes; physical changes; product and technology innovation; operational efficiency; reputation; financial impacts; and changes in consumer needs. However, these studies are mainly based on qualitative research methods. Therefore, this study aims to investigate with a quantitative analysis the contextual drivers of multinational enterprises' responses to climate change considering the risks and opportunities identified by previous studies. The research is based on the Carbon Disclosure Project climate questionnaire of 2015, which includes information of 1896 companies within different industries and countries. The analyses highlight that the business continuity is mainly endangered by the physical changes; changes in demand for goods/services or new product/services correspond to market changes drivers; changes in market valuation correspond to reputation drivers. Finally, changes in operational costs and investment opportunity correspond to regulatory drivers. The study provides contributions to the literature on business responses to climate change and implications for business and public policy.

Profit-led growth and the stock market

This paper presents a simple stock-flow consistent model of corporate capitalism with a financial market for firm equities issued by managers as part of their investment plan with the investment rate in turn sensitive to the q ratio, workers who save for life-cycle motives, and capitalist rentier households who save from a bequest motive. The model assumes full capacity utilization; saving and investment decisions are coordinated through changes in the valuation of the capital stock or q ratio. Changes in valuation can induce enough investment and capitalist consumption to fill the demand gap left by a reduction in the wage share. But unless there is a strong sensitivity of investment to the q ratio, the increased profitability will be dissipated in a profit-led stock market boom. The model helps resolve the neoliberal paradox of rising profitability with little growth. It also clarifies the relationship between classical and Keynesian growth models which can be seen as special cases arising from limiting values of the investment sensitivity to the q ratio.

Exploratory Study on the Stability of Consumer Rationality in Judging Online Reviews

Consumers are often asked valuate the quality of online reviews. However, they often misjudge the true value of reviews because their thoughts on reviews are not well formed with criteria. This exploratory study conducted stylized survey-based experiments using 217 consumers. Consumers typically underestimate the value of reviews because they do not always use valuation criteria when reading reviews. The extent of such underestimations ranges from 12% to 15% for goods with objective attributes like electronic products. In addition, nearly half of the consumers revised their review valuations upon taking a second look at the same review for these goods. Close to one-third of the consumers changed their review valuations for subjective goods like music albums. Such valuation changes are specific to consumer profiles. Their predominant emotional sentiment also has a varying effect on subjective and non-subjective goods.

Rating-based Investment Practices and Bond Market Segmentation

This paper documents a new channel for rating-based bond market segmentation, which, in contrast to prior research, is based on nonregulatory investment management practices. A 2005 Lehman Brothers index redefinition provides a quasinatural experiment in which a number of previously high-yield split-rated bonds were mechanically relabeled as investment grade. Although their regulatory standing was unaffected, these bonds had abnormal yield declines of 21 basis points. These valuation changes can be traced to buying by asset-class-sensitive institutional investors for whom these bonds became investable. Reputation, regulation, indexation, and liquidity cannot explain the observed price and trading patterns.

Global diversification discount and its discontents: A bit of self‐selection makes a world of difference

Research summary: The documented discount on globally diversified firms is often cited, but a correlation is not per se evidence that global diversification destroys firm value. Firms choose to globally diversify based on their firm attributes, some of which may be unobservable. Given these exogenous firm attributes, the decision to diversify globally is endogenous and self‐selected. Our study offers a replication of an earlier study. Using the same specifications save for the Heckman selection instrument, our results contradict past research that did not address endogeneity. We posit that the global premium should reflect the value of multinational operating flexibility. We use the 2008–2009 financial crisis as creating exogenous variation to permit a test for the positive change in firm valuation due to global diversification. During the 2008–2009 financial crisis, the premium associated with global diversification became larger and more significant than before the 2008–2009 financial crisis. The churn of subsidiaries entering and exiting countries increased during the crisis, pointing to the value of an operating flexibility to restructure the geography of the multinational network. In all, the results contradict past findings and provide evidence that operating flexibility is more valued during times of high volatility, thus generating the diversification premium.Managerial summary: There are thousands of multinational corporations that have been international for decades and some even longer. They undoubtedly learned that there is money to be made in international markets. Yet, the recent academic literature has found that foreign diversification destroys firm economic value. Our article uses a statistical technique that corrects for an obvious problem. Some firms invest overseas because they are facing troubles, for example, they are experiencing slowing growth and are exiting bad home markets. Once we correct for this “selection bias,” we find that global diversification, at worst, has no negative effect on value. However, during the financial crisis, the value of multinational companies increased. This finding is consistent with the option theory of multinational investment whereby operating in multiple countries permits firms to shift their activities among countries. Overall, our results indicate that there is a reason for why firms globalize: It is profitable. Copyright © 2016 John Wiley & Sons, Ltd.