G30 - Corporate Finance and Governance: GeneralReturn

The article examines the market valuation approach using industry market multiples as this method has recently attracted increasing interest from appraisers. It investigates whether constructing one’s own industry market multiples for company valuation which are based on a market approach provides better results than using Damodaran’s market multiples in terms of the resulting valuation accuracy. The study uses a sample of 162 German companies publicly traded in 2010–2019 and analyses some of the most frequently adopted multiples: EV/EBITDA, P/BV and P/E. Moreover, the presented results may guide the appraisers in selecting the most appropriate valuation approach. Based on the statistical error analysis, the results prove better valuation accuracy of the own-built market multiples compared to Damodaran’s multiples. Nevertheless, this study is limited to German listed companies and should not be relied upon with respect to other European markets. Furthermore, its scope is limited to only 15 industries which are listed by Damodaran and subsequently included in the test sample.

This article deals with the method of calculating lost profits, or determining the relevant basic formula, respectively. The aim is to summarise the knowledge about the used calculations, evaluate them and comment on the possibility of their use with regard to the purpose of the prepared calculation of economic damage and the nature of the economic damage case, respectively. The link of the area of quantification of economic damages with a certain legislative framework naturally follows from the very subject of the economic research, i.e. damage. I will examine the above within the legislation of the Czech Republic, which uses different terms related to economic damage and which represent different levels/categories of damage. Based on a search of the relevant literature and the case law, the intention of this article is to determine which parts of the calculation represent the levels/categories of damages that may be caused and the impact of this categorisation on the appraiser's overall approach to the quantification of appropriate damages and the complexity of proving.

This article analyses compliance with information disclosure requirements under IFRS 3 Business Combinations in 23 companies trading at Prague Stock Exchange. The analysis was performed with the use of publicly available data contained in annual reports of the companies. Beyond quantification of the level of compliance, the research explores which factors affect diligence in following IFRS 3 disclosure requirements, specifically the company size, history of trading on the stock exchange, ownership structure and the acquisition price paid. The literature review also focuses on aspects with a potential to influence the level of diligence in areas of disclosure and consequences of infringing the disclosure rules. The paper concludes that the level of compliance can be considered average and in some cases unsatisfactory, while the company size and longer history of trading on PSE are positively correlated with the quality of disclosure.

This paper investigates the implications and effectiveness of Basel III leverage requirements for the banking sector in the Czech Republic and its comparison with the Central and Eastern European (CEE) region. We discuss the relationships between the leverage and capital ratios and analyse their constraining effects and cyclical qualities. The empirical analysis consists of examination of the correlation patterns between the leverage and capital ratio in relation to the changes in the business cycles. We propose an empirical model that allows testing how the leverage ratios and their variables respond to the changes in the economic cycles of the CEE region. The analysis of correlation patterns among the variables suggests that the total assets or exposure in contrast to the Tier 1 capital are the main contributors to the cyclical movements. The regression analysis shows that the leverage ratio in normal times is strongly pro-cyclical to the capital ratio and counter-cyclical in the crisis period. The empirical evidence indicating the active balance sheet management in response to the cyclical changes advocates in favour of constraining regulations on the leverage.

Guarantee insurance is used by the state to solve some questions of consumer protection. To be specific it is insurance of tour operators against bankruptcy and insurance of employment agencies against bankruptcy. In both cases the insurance covers business risks of businesses and legal entities and that is the reason why the use of guarantee insurance in this context brings about several problems. On the one hand there are theoretical problems which deal with interpretation and explanation of the nature and principles of insurance and their application to insurance products and also problems concerning risk assessment of these products. On the other hand there are problems which deal with practical application and which are connected with the fact that there is no big interest in this kind of guarantee insurance among insurers with regard to their nature. Issues which approach the problem of consumer protection by means of commercial insurance are also related to the perception and understanding of insurance. Consumers demand full insurance coverage, however, taking into account the regulation of insurance market and the nature of insurance it is not possible to guarantee full insurance cover of losses which are caused by bankruptcy of a tour operator or an employment agency.

This paper investigates the relationship between growth rate and shareholder value creation, using a sample of 243 non-financial Standard and Poor's 500 (S&P500) companies, which have 22 years of consecutive data available (1993-2014). Sustainable Growth Rate Model (SGR) is used to divide the sample into two groups as high growth firms and moderate growth firms. Using Panel data approach, it is shown that sales growth below sustainable growth rate (SGR) enhance shareholder value at a significantly higher rate compared to growth above sustainable growth rate. The findings suggest that shareholder value creation maximizes around sustainable growth rate and decreases sharply once SGR exceeded.

The paper deals with relationship between liquidity and profitability ratios in the Czech Republic to investigate whether there exists correlation (a) within selected liquidity ratios and (b) selected liquidity ratios and selected profitability ratio in the Czech Republic during the period 2003-2013. Empirical data from Bureau van Dijk, Amadeus database were analysed from the point of both time-series and cross-sectional analysis. The main findings of the paper are that correlation within selected liquidity ratios is fairly strong while correlation between selected liquidity ratios and selected profitability ratio is relatively weak.

Zero coupon rates are not observable in the market for a range of maturities. Therefore, an estimation methodology is required to derive the zero coupon yield curves from observable data. If we deal with approximations of empirical data to create yield curves it is necessary to choose suitable mathematical functions. We use parametric model of Nelson and Siegel. The current mathematical apparatus employed for this kind of approximation is outlined. This theoretical background is applied to an estimation of the zero-coupon yield curve derived from the Czech coupon bond market. There are many methodologies and each can provide surprisingly different results. Nevertheless, each seeks to provide an estimation that fit the data well while maintaining an easily interpretable form. On an initial test data sample we have not faced any problems, reported elsewhere, of not having found the global optimum or having found multiple local minima.