Higher Valuation Research Articles

The Rise of Scientific Research in Corporate America

It is widely believed that university and corporate research are complementary: companies invest in research in part to develop the capacity to absorb the knowledge emerging from universities. However, as we show in this paper, corporate research in the United States emerged when American universities were behind the world frontier in scientific research. Why, then, did for-profit businesses choose to invest in creating new knowledge, much of which could spill over to rivals, and whose conduct presented many managerial challenges? We argue that corporate research in America arose in the 1920s to compensate for weak university research, not to complement it. Using newly assembled firm-level data from the 1920s and 1930s, we find that companies invested in research because inventions increasingly relied on science but American universities were unable to meet their needs. Large firms close to the technological frontier and operating in concentrated industries were likely to invest in research, especially in scientific disciplines where American universities lagged behind the scientific frontier. Corporate science seems to have paid off, resulting in novel patents and high market valuations for firms engaged in research. Funding: A. Arora, S. Belenzon, and J. Suh acknowledge support from the Fuqua School of Business, Duke University. S. Belenzon and Y. Yafeh gratefully acknowledge financial support from the Israel Science Foundation [Grant No. 963-2020]. K. Kosenko is grateful for support from the Bank of Israel. Y. Yafeh acknowledges support from the Krueger Center at the Hebrew University of Jerusalem School of Business. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2023.18053 .

Do stock prices deviate from their fundamental values during and after COVID-19? Evidence from Fintech firms

Purpose This study aims at investigating the nexus between stock misvaluation, Fintech and COVID-19 via identifying the firm-level misvaluation of Fintech firms, and additionally examining how the COVID-19 pandemic has affected this misvaluation. This study further examines how the level of stock misvaluation has changed after the COVID-19 pandemic to shed more light on the pricing behavior of Fintech in a post-pandemic world. Design/methodology/approach The sample consists of all Fintech firms listed in the STOXX Global Fintech Index over the period (2014–2023). To empirically identify stock misvaluation, the authors apply the widely used approach of Rhodes-Kroph et al. (2005). Then, a series of fixed-effects regressions is conducted to investigate the impact of the COVID-19 pandemic on mispricing. Findings This study finds compelling evidence that Fintech stocks tend to be particularly mispriced during the COVID-19 pandemic. This evidence suggests that investors became more attracted to Fintech stocks, as being exposed to widespread adoption, usage and investment worldwide during the pandemic. Interestingly, the findings show that Fintech firms remain overvalued, even after the pandemic, which indicates that investors maintain their positive expectations for Fintech firms after the COVID-19 pandemic. Practical implications For investors and fund managers, the observed high valuation in the Fintech sector highlights its noticeable growth in the financial industry. The results also suggest that the impact of the COVID-19 pandemic on pricing behavior is asymmetric across the undervalued and overvalued Fintech stocks. This finding provides important insights for portfolio construction and investment strategies during the hard times of pandemics. Originality/value No previous work has been done on the effects of the COVID-19 pandemic on the prevailing levels of mispricing in Fintech stocks. Moreover, the findings provide novel insights into the pricing efficiency in the context of Fintech and extend the understanding of the long-term effects on Fintech firms in a post-pandemic world.

South Korea’s Megacorp and super app: Kakao’s paths to market dominance

This paper traces Kakao’s corporate strategies—with a focus on conglomeration and valuation—in order to trace how the company’s trajectory led to its current status as a near-monopoly. Starting as a chat app which now has 43 million active users in South Korea, Kakao became a conglomerate by expanding its operations across different business sectors such as transportation, entertainment, fintech, etc. Kakao’s diversification of businesses and conglomeration should be understood in relation to its corporate strategies and forms, not as the natural outcome of technological innovation. Aspiring to become an entertainment conglomerate, not just a platform company, Kakao has expanded the scope of its business by acquiring start-ups and competitors, spinning off in-house startups as subsidiaries, and making strategic mergers between subsidiaries. Kakao has also placed greater focus on boosting valuation rather than profitability, a crucial strategy for leveraging high valuations to consolidate its market dominance. Tracing Kakao’s affinities to chaebol, I further propose a framework for thinking about the relationship between the state, tech, and finance. Collusion between the state and tech has occurred through deregulation, which has allowed tech companies to become financial capital.

Understanding the Indian Startup Ecosystema Holistic Exploration of Dynamics, Profitability, and Employee Perspectives

Abstract India has established itself as the third-largest global startup ecosystem, with thriving start-ups. Despite commanding high valuations, startups across diverse sectors are grappling with challenges in achieving profitability. Increasing concerns about job security and the potential for additional layoffs in the absence of an improved funding environment are causing apprehension among talent, even within larger startups. The research intends to analyse the Indian startup ecosystem, analyse and compare the profitability of chosen Unicorns and Decacorns in both listed and unlisted categories, and understand the employee perception of working in startups. An analytical research design is followed. To understand employee perception, a survey facilitated through a structured questionnaire has been conducted among 100 employees of startups situated in Karnataka and Kerala, regions distinguished for their highly supportive ecosystems. Analysis depicted a discrepancy in profitability suggesting that Decacorns, with their startup status, robust valuations, and soaring operating revenue, have yet to establish themselves as consistently profitable entities. Findings from the employee survey highlight that learning opportunities and accelerated career growth stand out as motivating factors for choosing employment in startups. Conversely, the downsides include concerns about change, job insecurity, and workload. The comprehension of stock options at the knowledge level was evident, potentially serving as a stirring factor for startups to incorporate into their employee benefits.

Co‐CEO Structure and Earnings Smoothing Incentives

AbstractThis paper investigates the effects of a co‐CEO structure on earnings smoothing and its implications for the informativeness of earnings. While the consequences of a co‐CEO structure have been relatively underexplored in prior research, existing studies suggest potential benefits, such as higher valuations and stronger internal governance. This paper delves into the specific consequences of a co‐CEO structure, focusing on earnings smoothing practices. Using data from Korean firms, where co‐CEO structures are prevalent, we find that firms with a co‐CEO structure exhibit smoother earnings compared to those with a sole‐CEO structure. However, the informativeness of these smooth earnings is reduced under a co‐CEO structure, suggesting that co‐CEOs engage in earnings smoothing primarily for their own benefit, rather than to provide more information to investors. Additional analyses reveal that co‐CEOs' earnings smoothing leads to adverse consequences for investors, including lower earnings quality, higher costs of capital, increased financial distress, greater credit risk, and higher stock price crash risk. Our study contributes to the literature by highlighting the potential costs associated with co‐CEO structures, particularly in terms of reduced earnings informativeness.

Intraconsumer Price Discrimination with Credit Refund Policies

Consumers often receive a full or partial refund for product returns or service cancellations. Much of the existing literature studies cash refunds, where consumers get the money back minus a fee upon a product return or service cancellation. However, not all refunds are issued in cash. Sometimes consumers receive credit that can be used for future purchases, oftentimes with an expiration term after which the credit is forfeited. We study the optimal design of credit refund policies. Different from models that consider cash refunds, we explicitly model repeated interactions between the seller and consumers over time. We assume that consumers’ valuation for the product/service varies over time and that there is an exogenous probability for product returns. Several interesting results emerge. First, a credit refund policy facilitates intraconsumer price discrimination for a single type of consumers with stochastic valuation. Second, an optimal policy often involves an intermediate credit expiration term, under which a consumer with a high product valuation always makes a purchase, whereas a consumer with a low product valuation may be induced to make a purchase as the credit approaches expiration, leading to a demand induction effect. Finally, a credit refund policy can be more profitable than a cash refund policy and can lead to a win-win outcome for both the firm and consumers under certain conditions. We also consider several extensions to check the robustness of our findings. This paper was accepted by Jeannette Song, operations management. Funding: Y. Liu was substantially supported by a grant from the Research Grants Council of the Hong Kong Special Administrative Region, China (Project No. PolyU15502420). Y. Liu was also supported by a grant from NSFC [72293564/72293560]. Supplemental Material: The data and online appendices are available at https://doi.org/10.1287/mnsc.2020.03042 .

Local labor market and corporate investment

To capture local labor market pooling in agglomeration economics, we employ segment information and occupation statistics to construct firm-pair labor force similarities. Our findings indicate a positive relation between local labor market thickness and corporate investment, influenced by both employer-driven labor demand and employee-driven labor supply. The findings are more pronounced in firms with more skilled labor, less routine-task labor, and higher product and technology competitions. Firms in thicker local labor markets also display higher investment efficiency, higher operating efficiency, and higher valuation. To mitigate the endogeneity concern, we employ an instrumental variable approach to show robustness. Overall, we uncover a specific linkage between the local labor market and corporate investment.

Consumers’ Evaluation of Vertebrates and Invertebrates through Price Premiums for Eco-Rice in Urban and Rural Japan

Balancing food production and biodiversity conservation is a big challenge around the world. Eco-friendly agriculture has the potential to overcome these challenges and achieve sustainability. Although some studies show the high valuation of flagship species (e.g., attractive birds and fish) in paddy land where eco-friendly rice is cultivated, limited research has been performed concerning non-specific species such as generalists inhabiting rice paddies that also contribute to agro-biodiversity and ecosystem services. Therefore, this study assesses the valuation of non-flagship vertebrates and invertebrates by applying a choice experiment to vertebrate- and invertebrate-friendly rice. To understand the spatial/regional heterogeneity of the valuation, a questionnaire survey was distributed to both urban and rural citizens in Japan. Our results demonstrated that almost all respondents expressed a desire to protect both vertebrates and invertebrates, with more appreciation for vertebrates than for invertebrates. The analysis also found regional heterogeneity between urban and rural areas in terms of vertebrate and invertebrate evaluations and purchasing intentions. Our findings indicate marketing potential in Japan to promote eco-friendly rice production in relation to vertebrate and invertebrate conservation.

High monetary valuation of regulating forest ecosystem services in Japan: integrating the best-worst scaling and contingent valuation methods

ABSTRACT Effective forest management requires an understanding of socially prioritized forest ecosystem services and their integration into forest management design. Approximately 70% of Japan, our study area, is covered by forests. Therefore, prioritization-based resource allocation play a fundamental role in forest management in Japan. However, there is a lack of clarity regarding which forest ecosystem services the public evaluate the most. Thus, this study evaluates the social priority of 13 forest ecosystem services based on public preferences by employing the best-worst scaling (BWS) technique. Our study also assesses the value of such services by integrating a contingent valuation method with BWS. The survey was conducted using an online questionnaire for Japanese citizens enrolled in a survey company as representatives of the Japanese public in January 2017; 720 responses were analyzed. The BWS results revealed that the freshwater stock was the most valued forest ecosystem service, followed by carbon storage. However, citizens considered cultural ecosystem services to be of lower importance. The mean willingness to pay (WTP) for freshwater stock was approximately USD 23.77, while the mean WTP for inspiration for culture and art was lower at USD 1.13. Our findings indicate that the values of cultural and provisioning services are lower than Japanese taxes for forest management and suggest that forest management should prioritize regulating ecosystem services.

Valuation Analysis of the Medical Beauty Industry Based on DCF Valuation

Contemporarily, with the development of China people who live in China have increase income. People have more attention of their appearance and the pursuit of quality of life is getting higher and higher, that the medical beauty Industry develop rapidly. The companies develop vigorously because consumers demand continues to increase nowadays that many companies in the medical beauty industry have investment value. However, some scholars query that why the company in the medical beauty Industry have such high valuation. Therefore, this study examines the leading enterprise in the medical beauty Industry called Aimeike, by means of collect and sort out the relevant data of Aimeike, used the discounted future cash flow model to analyze the valuation about Aimeike, on this account reflects whether the overall valuation of the medical beauty industry is on the high side. In order to provide investors some investment orientation and this study will offer some examines for the companies in medical beauty industry. During the research, there are high valuations in the medical beauty industry.

A Financial Analysis and Valuation of Home Depot

This study aims to research and analyze the firm’s valuation of Home Depot by exploring the company’s background and recent events, evaluating company performance, forecasting future development, and discovering the firm’s strategy and risk. The performance evaluation uses liquidity, solvency, and profitability to assess the firm operations and use of resources. The additional valuation adopts current and next year’s forecast financial data to measure the company’s EPS and revenue growth rate, P/E, PEG, and GP/A ratios. The results show that Home Depot has high liquidity, high profitability, and low solvency from its operational performance, as well as a high long-term valuation forecast in the home improvement retail industry. This consequence implies that Home Depot may have efficient business management and sound financial health by effectively meeting short-term obligations and using assets to generate revenue. Meanwhile, the company may also pose several risks, including an unstable economic environment, difficulty meeting long-term obligations, the continued decline in annual gross margins and ROIC, and potential stock overvaluation for investors.

Unveiling Consumer Perceptions and Preferences in the Era of Disruptive Innovation of New Energy Vehicles Market in China

This study examines Chinese consumers' perceptions and responses to disruptive innovations within the New Energy Vehicles (NEVs) market, utilizing a questionnaire survey to explore awareness, perceived value of technological advancements, and the impact of these perceptions on adoption decisions. The survey, encompassing a diverse demographic of 154 respondents, highlights a female majority with a significant representation from the "25-34" age group, indicating a young, educated demographic with a considerable interest in NEVs. Analysis reveals a moderate familiarity with NEVs, a high valuation of technological progress, and a clear recognition of charging infrastructure availability as critical factors influencing adoption. Primary barriers identified include the high initial cost and limited charging infrastructure, with the data suggesting a strong potential for NEVs market growth if these concerns are addressed. Additionally, the survey uncovers optimistic future expectations among consumers, closely tied to government policies, technological advancements, and evolving market trends. This research contributes to understanding consumer attitudes in the rapidly changing NEVs landscape, offering insights for stakeholders to foster adoption and align strategies with consumer preferences and needs, underscoring the necessity for focused educational and marketing efforts to mitigate existing barriers and leverage consumer interest in technology.

Spatial valuation of urban green lungs: Unveiling the true worth of urban parks through MGWR in Chengdu, China

Urban green spaces (UGS), often metaphorically referred to as the “green lungs of cities,” play a crucial role in sustainable urban development and are a key element of land-use policy. This study evaluates the economic value conferred by UGS through urban parks, employing a Multi-scale Geographically Weighted Regression (MGWR) model within a hedonic pricing framework. By focusing on the localized impact of UGS on housing markets in developing megacities, this research utilizes Chengdu, China, as a case study to reveal spatial patterns in property valuations. The findings demonstrate a significant localized impact of UGS on housing prices, characterized by pronounced spatial heterogeneity. A substantial premium on housing values is correlated with proximity to urban parks, reflecting a high market valuation of these green spaces. This premium varies spatially, diminishing in more peripheral urban zones but still significantly influencing overall housing market dynamics. The study highlights the importance of reassessing rapid, policy-driven park expansions. There is a need for value-based UGS integration in sustainable urban planning, emphasizing strategic, ecologically informed decision-making that balances land development with conservation and meaningful resident engagement.

Comparative Analysis of Investment Value in the Media and Entertainment Industry

Propelled by technological development, the Media and Entertainment (M&E) industry has experienced a remarkable transformation and expansion over the past few decades, giving rise to numerous potential investment opportunities. In this context, this essay conducts a comparative analysis of value investing in the M&E industry, focusing on Paramount Global, Netflix, Fox Corporation, and The Walt Disney Company. This research utilizes value investing principles proposed by Benjamin Graham to evaluate the financial strength and profitability of four research subjects. The study suggests Netflix as the most desirable investment due to its robust revenue growth, EPS projection, and profitability trends while highlighting the fierce competition, high valuation risks, and cybersecurity threats faced by Netflix. This paper also acknowledges its limitations related to historical data, market dynamics, and quantitative analysis. The aim of this study is to explore implying value investing in the M&E industry and provide investors with a recommendation of the most desirable investment option in this sector.

Carbon disclosure, greenhouse gas emissions and market value of FTSE 350 firms – evidence from voluntary carbon disclosers versus non-disclosers

ABSTRACT In 2013, a carbon disclosure mandate was adopted by UK-listed companies. This motivated our study to explore the effects of the 2013 carbon disclosure regulation (CDR) and Greenhouse Gas (GHG) emissions on firms’ market value for voluntary disclosers versus non-disclosers pre- and post-2013 CDR. Using a sample of FTSE 350 firms in a short (2010–2016) and long window (2010–2020), our difference-in-differences design shows a beneficial (adverse) effect of the 2013 CDR on market value for voluntary carbon disclosers (non-disclosers). Also, we document the negative impact of GHG emissions on market value after the 2013 CDR for voluntary disclosers. In contrast, a somewhat positive GHG-market value nexus is noted in the case of non-disclosers post-2013 CDR. Our evidence suggests that voluntary carbon disclosers are heavier GHG emitters and, hence, bear much higher environmental risks/liabilities, a negative attribute that became ever more taxing to their market value after the 2013 CDR. HIGHLIGHTS The UK's 2013 carbon disclosure regulation (CDR) influenced the market values differently for firms based on their disclosure behaviours, showing a positive (negative) impact for voluntary carbon disclosers (non-disclosers). In the post-CDR era, the GHG emissions of voluntary disclosers were penalized with lower market value while the GHG emissions of non-disclosers were somewhat rewarded with higher valuation. Compared to non-disclosers, voluntary disclosers are typically larger emitters facing greater environmental risks after the CDR; a negative attribute that continues to undermine their market valuation.

Effect of corporate governance and enforcement on fair value accounting in Brazil

PurposeThis paper aims to investigate whether Brazilian firms that legally bond to stricter enforcement and commit to stringent corporate governance requirements experience increased value relevance of discretionary fair value measurements (Levels 2 and 3), and how different measurement levels are associated with firms’ systematic risk.Design/methodology/approachThe Brazilian data’s distinctive feature helps in analyzing fair value’s relevance in an emerging market with heterogeneous enforcement regimes. Given the inherent self-selection in corporate governance levels and cross-listing decisions, the authors use a two-step generalized method of moments approach. Building upon Song et al.’s (2010) framework, the authors carefully address potential selection biases. Furthermore, the authors expand Riedl and Serafeim’s (2011) model, based on Ohlson’s (1995) model, to explore whether the negative correlation between Level 1 net assets (assets minus liabilities) and firms’ beta is more pronounced compared to Levels 2 or 3 net assets. Additionally, the authors investigate whether this relationship intensifies when firms align themselves with enhanced governance structures and stricter enforcement regimes.FindingsFair value measurements which require more judgment (Levels 2 and 3) are more value-relevant when a firm is legally bonded to higher enforcement and better corporate governance. Level 1 fair values of these firms’ net assets are associated with lower systematic risk, while Levels 2 and 3 fair values (high subjectivity valuation) are not.Originality/valueThe authors show that firms that bond to better corporate governance and stricter enforcement regimes mitigate the information risk involved in subjective fair-value measurements.

Aggressiveness in Driving: A View From the Spanish Drivers' Perception.

Aggressiveness is a concerning issue due to its contribution to road crashes. This study aims to provide an overview on how Spanish drivers perceive aggressive driving, analyzing how this perception is linked to sociodemographic features. Thus, a cross-sectional study was designed, where 1,079 Spanish drivers took part in a telephone survey on aggressiveness' importance, influence on traffic accidents, and frequency of performance. For data processing, Exploratory Data Analysis and Unifactorial Variance Analysis were conducted. The results showed that the perception of aggressive driving has a high valuation and a high-perceived risk, with differences for sex, age, and driving experience. The findings suggest that some groups perceive more aggressiveness than others, meaning it is necessary to develop measures to reduce biases through a gender perspective.

Co-creation in a duopoly considering the effect of product return

Co-creation has become popular in experience good markets as it can resolve the uncertainty of the mismatch between product attributes and customer preferences. This paper delves into an examination of how firms strategize product co-creation with their customers in a competitive duopoly context, all the while taking into account the potential product return stemming from mismatch uncertainty. Results show that when the launching cost is moderate and the customer’s participation cost is relatively small, an asymmetric equilibrium with one firm launching the project and the other not is reached; otherwise, both firms adopt co-creation or not, conditional on the launching cost. Besides, firms may fall into a prisoner’s dilemma in which both firms launch the project when the launching cost is moderate. Furthermore, it is shown that co-creation functions as an effective way for firms to escape the Bertrand trap and reap the benefits of the product’s high valuation. Additionally, there is a mutual influence between co-creation and product return. A higher product return cost incentivizes firms to embrace co-creation, but meanwhile, it makes them more susceptible to falling into a prisoner’s dilemma scenario. In a state of equilibrium, co-creation consistently diminishes the product return for the firm engaging in it. Particularly, the firm not providing co-creation can take a free ride on the competitor’s co-creation benefits in reducing product return when the return cost is relatively large. Lastly, the value of co-creation can be amplified through the implementation of a price discrimination strategy, particularly when the participation cost is relatively large.

The impact of macroeconomic policy uncertainty on micro-enterprise investment efficiency-Empirical evidence from China.

The impact of macroeconomic policy uncertainty (EPU) on micro-level entities has garnered increasing attention in economic circles. This study examines the influence of EPU on the efficiency of investments made by China's A-share listed companies between 2016 and 2021. Using a panel fixed effect model for analysis, the research reveals that EPU has a notable adverse effect on the investment efficiency of enterprises. Furthermore, it suggests that advancements in digital finance, strong ESG performance, and enhanced entrepreneurial confidence can mitigate this negative impact effectively. The study also highlights that enterprises with lower valuation, shareholder control, limited audit reputation, and no bank connections are more vulnerable to the impact of EPU on investment efficiency compared to those with higher valuation, manager control, strong audit reputation, and bank connections. Consequently, future efforts should be directed towards enhancing the stability and relevance of economic policies, promoting digital finance, and enhancing corporate governance structures.

The Influence of Capital Structure, Company Growth and Company Value on Share Prices in Coal Sub-Sector Companies Listed on the Indonesian Stock Exchange 2018-2023

This study aims to empirically investigate the impact of Capital Structure, Company Growth, and Company Value on stock prices. Employing a quantitative descriptive research method with a verificative approach, the study utilizes panel data regression analysis to examine these relationships. The research focuses on Coal Sub-Sector Companies listed on the Indonesia Stock Exchange from 2018 to 2023, encompassing a sample of 12 companies. The findings reveal that Capital Structure negatively influences stock prices, indicating that higher debt levels may detract from stock value. Conversely, Company Growth is found to have no significant effect on stock prices, suggesting that growth metrics do not necessarily translate to market valuation in this sector. In contrast, Company Value exerts a positive impact on stock prices, demonstrating that higher valuation metrics are associated with increased stock prices. These results provide valuable insights for investors and stakeholders in the coal sub-sector, highlighting the critical factors that drive stock price movements and offering a basis for more informed investment decisions.