Value Of Corporate Equity Research Articles

Taxes, Capital Structure Choices, and Equity Value

We use a multitude of tax reforms across the Organisation for Economic Co-Operation and Development (OECD) countries as natural experiments to estimate the market value of the tax benefits of debt financing. We report time-series evidence that tax reforms are followed by large changes in the value of corporate equity. However, the impact of tax reforms is greatly mitigated by the presence of leverage. The value of debt tax savings is greater among top taxpayers, among highly profitable firms, and in countries where tax laws are more strongly enforced. Importantly, the value of debt tax savings is in line with the benchmark implied by a traditional approach.

The Impact of Isak 29 on the Value Relevance of Accounting Information (Empirical Study on Mining Companies Listed on the Indonesia Stock Exchange 2013-2015) Elvian Galang Prabuwoso1, Bambang

The Impact of Isak 29 on the Value Relevance of Accounting Information (Empirical Study on Mining Companies Listed on the Indonesia Stock Exchange 2013-2015) Elvian Galang Prabuwoso1, Bambang Setyobudi Irianto, Laeli Budiarti Abstract The purpose of this study is to examine whether ISAK 29 has an impact on the value relevance of accounting information of mining companies listed on the Indonesia Stock Exchange. This study attempted to reveal market reaction to accounting standard policies changes, acertainaccounting numbers can reflect the information that investors use in assessing the value of corporate equity. Reduction phenomenon in market capitalization and stock index of mining sector coincided when ISAK 29 start to be effective, indicate the negative reaction to ISAK 29 implementation. This phenomenon is contrast with DSAK's goal of adopting IFRS, which is to improve the functioning of the global capital market by providing relevant, more comparable and high-quality information to investors. The population used in this study is mining company listed on the Indonesia Stock Exchange in 2013 and 2015. Total mining company listed on the Indonesia Stock Exchange is 41 companies. Sampling method to select the sample in this research is purposive sampling. The total sample of this study is 32 mining companies for each year in 2013 and 2015. This study used price test with valuation model, the results showed an increase in adjusted R2, indicate that the implementation of ISAK 29 in Indonesia has an effect of increasing the value relevance of accounting information. Therefore, there is an increase in the value relevance of accounting information of mining companies in Indonesia after implementation of ISAK 29. Chow test result showed that the F-stat value is greater than F-table, the test results indicate a structural changes of the valuation model that used to determine the value relevance of accounting information after the implementation of ISAK 29. In conclusion, implementation of ISAK 29 effected the structural changes in the form of value relevance differences. Full Text: PDF DOI: 10.15640/ijat.v5n2a4

The Triple Taxation of Corporate EquityProfits

In the absence of liquidations and share repurchases, the value of corporate equity is the net present value of all future dividends. This net present value is subject to three taxes: the corporate income tax, the dividend income tax, and the capital gains tax. Algorithms are developed for calculating the aggregate tax rate on corporate equity net present value. Although the lowest aggregate tax rate occurs when all earnings are paid as dividends, corporations increase shareholder value by reinvesting earnings whenever the after-tax returns of doing so exceed the discount rate. It is these high return investments that are subject to the highest aggregate tax rates, potentially exceeding 90 percent of pre-tax value under current law.

Keiretsu Affiliation and Equity Values in Japan

This study examines the association between keiretsu affiliation and corporate equity value in Japan. We hypothesize that, ceteris paribus, keiretsu firm value, measured as Tobin's Q, is higher than non-keiretsu firm value, reflecting the improved or active monitoring role of the keiretsu arrangement. The empirical tests are supportive after controlling for other financial and ownership variables. The results also show that keiretsu firm value is positively related to the strength of the keiretsu. This is additional evidence that the monitoring provided by the keiretsu relationship does indeed increase corporate equity value, and that the source of the increase in value is not merely a result of cross-shareholding, but inherent to the keiretsu arrangement. However, the effect of keiretsu membership and influence on market equity values has apparently diminished since 1990 (the post-market crash period in Japan).

THE 1929 STOCK MARKET: IRVING FISHER WAS RIGHT*

Many stock market analysts think that in 1929, at the time of the crash, stocks were overvalued. Irving Fisher argued just before the crash that fundamentals were strong and the stock market was undervalued. In this article, we use growth theory to estimate the fundamental value of corporate equity and compare it to actual stock valuations. Our estimate is based on values of productive corporate capital, both tangible and intangible, and tax rates on corporate income and distributions. The evidence strongly suggests that Fisher was right. Even at the 1929 peak, stocks were undervalued relative to the prediction of theory.

Investor attitudes toward the value of corporate environmentalism: New survey findings

AbstractDuring the past several years, an increasing body of evidence and opinion has formed concerning the relationships between advancements in environmental, health, and safety (EH&S) management and the financial performance of the organization. In recent work,1 we have described a new theoretical model linking improvements in environmental management systems and environmental performance to corporate risk, stock volatility, and market value, as well as an empirical evaluation that validated our model. A number of other studies2 have documented changes in the market value of corporate equity as a function of environmental accidents, incidents, and (conversely) accomplishments. These are in addition to the numerous examples presented in the literature and at EH&S conferences and symposia that suggest that concerted efforts to reduce the organization's environmental “footprint” can yield cost savings, increased market share, reduced time to market, and perhaps other financial benefits. Some have gone so far as to proclaim that a new era has begun, in which environment‐friendly corporations will increasingly be recognized and rewarded by financial market participants, and organizations that lag behind will be severely penalized.3 This article documents a new survey undertaken to identify important environmental factors, if any, investors employ in evaluating the quality and worth of equity and debt financing instruments.

Share values, inflation, and escalating tax rates

The interaction of inflation with a progressive tax system has been known to cause tax rates, and thus tax liabilities, to escalate with nominal income. Often blamed for having undesirable effects on investment and wealth, this feature of modern tax systems has not received formal treatment in the literature. The present study examines the impact of this inflation-related phenomenon upon the value of corporate equity within the framework of partial equilibrium. It is shown that the combination of moderate inflation and a mildly progressive rate structure may have a substantial adverse effect on share values, an effect sharply increasing with the firm's real growth rate. These results provide a partial explanation for the apparent conflict between the Fisherian hypothesis and the commonly observed inverse relationship between the rate of inflation and the deflated value of stock price indices. To the extent that occasional adjustment of tax schedules does not prevent taxpayers from being pushed toward higher tax brackets, these results suggest a sizable potential benefit from full indexation of tax rates in an economy suffering from chronic inflation. They also confirm the belief that failure to do so is expecially harmful to economic growth.