Bernhard Schwetzler

Unternehmensbewertung unter Unsicherheit — Sicherheitsäquivalent- oder Risikozuschlagsmethode?

SummaryFor discounting uncertain cash flows one can use certainty equivalents or risk-adjusted discount rates. In a multi-period setting these methods seem to lead to different results. This paper shows that the difference comes from different assumptions about the stochastic process governing the cash flow distributions implicitly made by frequently used formulations of the two methods. We present formulations of both valuation methods appropriate for both different stochastic processes which lead to correspondent firm values. We show that this result does not depend on whether certainty equivalents or risk adjusted discount rates are generated via capital market data or via the investor’s preferences.

Terminal Value, Accounting Numbers, and Inflation

The terminal value generally reflects a substantial portion of a firms market value. Stable growth models are usually used to estimate terminal values. We use a simple model of a firm to derive a valuation function for the terminal value in the presence of inflation. Our model reveals that there is a simple way to include the effect of inflation in the valuation model. Moreover, we show that recent recommendations on how to consider inflation in valuation models fail to provide correct estimates of firm value.

Mountain or Molehill? Downward Biases in the Conglomerate Discount Measure

The Berger and Ofek (1995) excess value measure, comparing a conglomerate’s actual market value to an imputed value based on standalones, has become the standard method to determine value effects of diversification. In this paper, we address a significant bias in this procedure stemming from the difference in cash holdings between diversified and standalone firms. Excess values are based on firm values, including corporate cash positions. As standalones hold significantly more cash, the imputed cash value is higher than the conglomerate’s actual cash value, resulting in a downward biased excess value. We thus propose to calculate excess values based on enterprise values, replacing total debt by net debt. Based on an extensive US sample, we show that there is significantly less evidence of a diversification discount when adjusting for the cash bias. In terms of average dollar losses, the firm value-based models overestimate the conglomerate discount by at least 25%. Apart from removing the cash bias, we propose a second modification to the excess value measure, arguing that standalone industry multipliers should be calculated using geometric mean aggregation instead of median aggregation.

Verluste trotz steigender Kurse? – Probleme der Performancemessung bei Zinsänderungen

Als Maßstab des Anlageerfolges von fremdverwalteten Wertpapierportefeuilles wird die Rendite (total return) allgemein akzeptiert. Insbesondere bei festverzinslichen Wertpapieren wird die Rendite erheblich von Marktzinsänderungen und den dadurch ausgelösten Kurswertänderungen der gehaltenen Wertpapiere beeinflußt. Der Beitrag zeigt, daß die realisierte Rendite bei Zinsänderungen keine eindeutigen Aussagen über den erzielten Anlageerfolg erlaubt. Als Ursache wird die gewünschte zeitliche Struktur des Mittelrückflusses abgeleitet, die den Anlagehorizont für die Performancemessung bestimmt. Anhand empirischer Fonds- und Zinsstrukturdaten des Jahres 1993 wird der genannte Effekt belegt

Costs of Financial Distress: The German Evidence

In this paper we aim to verify the existence of costs of financial distress (cfd) for a sample of German CDAX firms using an ex-post approach originally due to Opler/Titman (1994). In contrast to this US-based study we do not find a significant interaction between high leverage and distress for German firms: firms in distressed industries with high ex ante leverage do not display lower sales growth than their ex-ante lower levered counterparts.

The Development of Earnings Quality in Germany and its Implication for Further Research: A Quantitative Empirical Analysis of German Listed Companies Between 1997 and 2006

This paper investigates the development of earnings quality for a sample of 5,817 firm years during the period between 1997 and 2006 using seven different measures (accounting- and market-based). As a result, overall earnings quality of German firms improves over time. However, the measures of timeliness and value relevance indicate a decreasing earnings quality. These findings are tested by taking firm-specific accounting style into consideration using firm fixed effects.

Conglomerate Discount and Cash Distortion: New Evidence from Germany

Conglomerate discounts or premia are derived by comparing market values of conglomerates with the market values of a matched portfolio of stand alone firms (the imputed value of the conglomerates). Usually this comparison is based on firm values. We show that in this case conglomerate discounts or premia are subject to a potential bias caused by different cash holdings of conglomerates and stand alone firms. We prove evidence of such a cash distortion for German data: as German conglomerates hold on average substantially higher cash positions than the matched portfolio of stand alones, excess firm values are systematically upwards biased. Deducting cash from firm value and calculating discounts or premia based on enterprise values removes the bias. Based on excess enterprise values we are able to show a modest, but statistically significant conglomerate discount in Germany that is about 6% on an enterprise value basis.

An Anatomy of Serial Acquirers, M&A Learning, and the Role of Post-Merger Integration

Using a global sample of 26,444 M&A transactions, we empirically investigate the main drivers of serial acquirer takeover performance, focusing on the benefits of organizational learning and the detriments of post-merger integration (PMI) problems. Taking single acquirers as a control group, we find that multiple deal makers exhibit a 0.4 percentage points lower short-term abnormal return, equal to a

Equilibrium Security Prices with Capital Income Taxes and an Exogenous Interest Rate

31M shareholder value disadvantage. While learning through experience does not depend on the quantity of acquisitions, serial acquirers can gain proficiency in some specific types of deals (specialized learning hypothesis). When looking at the PMI process, the time between two consecutive transactions and relative deal size are key success factors, suggesting that the capacity of an organization to integrate is limited. This is strong support for the indigestion hypothesis.

Zum Wert ertragsteuerlicher Verlustvorträge

We are interested in the effect of capital income taxes upon security prices when investors face locally segmented stock markets and a global bond market. Therefore, we analyze an equilibrium model of an economy with binomial uncertainty, an exogenous risk-free interest rate, and a representative stand-in household. In this setting, the pricing effect for domestic securities is shown to be a function of three variables: the covariance between pretax payoffs of securities and the aggregated market portfolio, the exogenous pretax interest rate, and the effect of taxation (and redistribution) on the aggregate welfare of the stand-in household. We find that taxation of capital income is nondistorting if tax proceeds are immediately redistributed within the cohort of capital market participants. If, however, taxation represents a policy tool to transfer wealth from capital market participants to non-market-participants, then the level of the statutory tax rate is reflected in equilibrium security prices, and taxation affects households portfolio decisions, which in turn may affect investment decisions of firms.