Topic
Embedded value
About: Embedded value is a research topic. Over the lifetime, 343 publications have been published within this topic receiving 8853 citations.
Papers published on a yearly basis
Papers
TL;DR: Serafeim et al. as mentioned in this paper examined the determinants and economic consequences of embedded value reporting, a voluntary disclosure arrangement in the life insurance industry, and found substantial reductions in bid-ask spreads for EV reporting firms, and links the occurrence of this disclosure practice to the nature of competition in the insurance business.
Abstract: Serafeim [2011] examines the determinants and economic consequences of embedded value (EV) reporting, a voluntary disclosure arrangement in the life insurance industry. He finds substantial reductions in bid-ask spreads for EV reporting firms, and links the occurrence of this disclosure practice to the nature of competition in the insurance business. In my discussion, I focus on two aspects of his hypothesis development: (1) does EV reporting give rise to a credible commitment to transparency? (2) What are the country-level determinants of EV reporting? First, on a conceptual level, I highlight the distinction between an ex ante commitment to transparency and ex post voluntary disclosure. To illustrate my point, I examine the change in information asymmetry around various voluntary disclosure choices with varying degrees of commitment. I find a reduction in bidask spreads following U.S. cross-listings and the voluntary adoption of IFRS, but not after a switch to a Big Five auditor. These results let me gauge the magnitude of the effects for EV reporting. Second, I discuss the notion of complementarities among the elements of a country’s institutional environment. I then empirically show that institutional forces likely act both ways, i.e., from a single industry to the rest of the economy and vice versa, and that EV reporting is not independent from other voluntary commitment devices in a country. In sum, my findings underscore the importance of (and difficulties in) cleanly identifying the determinants and effects of voluntary disclosure choices. JEL classification: G14, G15, G30, K22, M41, M42
21 citations
TL;DR: The fuzzy payoff method (FPOM) as discussed by the authors is a real option model that uses scenario planning approach to generate a range of figures, from which a single-numerical value is computed for decision-making.
Abstract: Purpose
Real option valuation is capable of accounting for uncertainties in residential development projects but still lacks practical adoption due to limited evidence to support application of the theory in practice. The purpose of this paper is to use option valuation to value staging option embedded in residential projects and compare with results from DCF to determine which of the two methods delivers superior results.
Design/methodology/approach
The fuzzy payoff method (FPOM), a real options model that uses scenario planning approach to generate a range of figures, from which a single-numerical value is computed for decision-making.
Findings
The results showed that the use of a range of figures was able to represent uncertainties to a higher degree of accuracy than the static DCF. As a result, the FPOM was able to capture about 3 per cent of the value of the project that was missed by the DCF. The staging option offers an opportunity to abandon unprofitable phases of a project, thereby limiting downside losses. Thus, real option models are practically applicable to cases in property sector.
Practical implications
Residential property developers must consider flexibility in financial feasibility evaluation of development because of the embedded value in uncertain property projects. It is important to account for optionality in financial evaluation of property projects for value maximisation.
Originality/value
The FPOM has been used for the first time to evaluate a horizontal phasing of a residential development project.
20 citations
Dissertation•
1 May 2012
TL;DR: In this paper, the authors present empirical evidence on the value relevance of accounting information in Jordan; whether institutional factors influence this value relevance and to determine which share price proxy is more reliable in indicating value relevance.
Abstract: The purpose of the study was to present empirical evidence on the value relevance of accounting information in Jordan; whether institutional factors influence this value relevance and to determine which share price proxy is more reliable in indicating value relevance. The study examines the influence of institutional factors (foreign ownership, trading volume, financial disclosure time, financial disclosure level, number of shareholders, listing status, company’s age and type of industry) on the value relevance of accounting information (earnings, book value and cash flows relative to three share price proxies including average annual share price, annual closing share price and share price after a three-month period following the financial year-end) for Jordanian services and industrial companies during the period from 2004-2009. The study found that book value has the greatest value relevance and the best predictor for firm value. The value relevance of earnings and book value is greater for companies having foreign ownership, larger trading volume, larger shareholder numbers that conform to financial disclosure time, that are listed on the main board and that are older in age. Value relevance of book value is greater for companies complying with disclosure requirements and for services companies. Finally, annual closing share price proxy is more reliable in detecting the value relevance of accounting information. The findings suggest that market participants might be able to extract the firm value through the aforementioned institutional factors. The study extends the valuation model by including cash flows together with earnings and book value. The findings demonstrate that there is a shift away from earnings towards book value as the basis of firm valuation.
20 citations
Journal Article•
TL;DR: In this paper, the authors investigate whether fair value information is value relevant within Australian firms in the extractive industries and provide evidence that the explanatory power of net fair value and the unrealised gain or loss beyond the book value and earnings valued at historical costs is very low.
Abstract: We investigate whether fair value information is value relevant within Australian firms in the extractive industries. From 2005, the Australian accounting standard on financial instruments, AASB 139 Financial Instruments: Recognition and Measurement, requires measurement of financial instruments based on fair values. This study provides evidence that net fair value information is value relevant. However, the significance of net fair value is limited to the recognised financial instruments and some settings. Further analysis provides evidence that the explanatory power of net fair value and the unrealised gain or loss beyond the book value and earnings valued at historical costs is very low.
19 citations
Journal Article•
TL;DR: In this article, the authors discuss the issues of increasing the perception of measurements for the creation of corporate value by introducing the concept of superior size, as well as relativization for e.g. evaluation of the benchmark.
Abstract: This article discusses the issues of increasing the perception of measurements for the creation of corporate value by introducing the concept of superior size, as well as relativization for e.g. evaluation of the benchmark. Consideration is also given to the connection between measurements used for creating added, market and income corporate value. The application section contains surveys carried out on listed companies, leading in the creation and destruction of added value in manufacturing. The findings have helped to assess the medium–term correlation of changes in superior market added value with changes in company capitalization and the economic added value and income value relative to market value
19 citations
Related Topics (5)
Performance Metrics
| Year | Papers |
|---|---|
| 2021 | 3 |
| 2020 | 2 |
| 2019 | 2 |
| 2018 | 3 |
| 2017 | 14 |
| 2016 | 20 |