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
1 Jan 2013
TL;DR: In this paper, the authors provide a range of empirical evidence on the appropriate estimate of the value of imputation credits by conducting three major studies, each approaching the issue from a different angle.
Abstract: Estimating the market value of dividend imputation tax credits is an important component of cost of capital estimation for companies operating within a dividend imputation tax system. There is a divergence of views about what represents an appropriate estimate of this value, and the different values that have been proposed have a substantial impact on the estimates of the cost and value of equity. This thesis provides a range of empirical evidence on the appropriate estimate of the value of imputation credits by conducting three major studies, each approaching the issue from a different angle. In the first study we infer the value of cash dividends, and the imputation tax credits that are attached to them, from simultaneous trades of ordinary shares (which entitle the holder to dividends and imputation credits) and individual share futures contracts (which provide no such entitlement). Our sample contains more than 30,000 observations from the period subsequent to the year 2000 change in tax laws that allowed a rebate for unused credits. Over this sample we find that the value of the combined bundle of one dollar of cash dividend and imputation credit is close to one dollar. We also show that the value of cash dividends and the value of imputation credits are estimated jointly and that it is important that they are interpreted jointly.The second study provides a complementary approach to the first by utilizing the prices of alternative derivative securities to infer the embedded value of dividends. We infer the value of the dividend package that is comprised of cash dividends, and the imputation tax credits that are attached to them, from simultaneous trades of ordinary shares (which entitle the holder to dividends and imputation credits) and exchange traded call options (which provide no such entitlement). Our sample contains more than 370,000 observations from the period subsequent to the year 2000 change in tax laws that allowed a rebate for unused credits. Over this sample, we estimate the value of the dividend package tobe approximately equal to the face value of the cash dividend.The third study examines the market impact of various significant changes to the dividend tax system to draw conclusions about the value of imputation credits incorporated in equity prices. The results of the third study suggest that the introduction of dividend imputation had no significant impact on equity prices in Germany and Australia. Our pricing model for Germany reveals no detectable difference in returns for the period of the introduction of dividend imputation and those of control period. Likewise our pricing model for Australia finds no difference between returns in the introduction period and those in the control period.The results of all three studies are consistent with dividend imputation having an immaterial effect on the cost of capital of Australian firms. This evidence is also consistent with the dominant commercial and market practices of making no adjustment in relation to dividend imputation when estimating the cost of capital or performing any other valuation exercises.
1 citations
TL;DR: In this article, the authors argue that although the question of whether the embedded value report and MCEV methodology really indicate the fair value of the insurance company remains controversial, the EV report contains data that gives better insights into the forces driving operating performance and the impact of management actions.
Abstract: In recent years, we have witnessed increasing acceptance of Embedded Value (EV)reporting as the most robust measure of shareholder value for life and health insurance businesses. Therefore, the Commissioner of Insurance in Israel decided to require insurance companies to disclose the EV of their life, pensionand health insurance business annually, beginning with the annual statements for FY 2007. Even though the insurance and financial community expected the publication of the EV data and emphasized its importance, the reaction of the capital market seemed to ignore the EV data.All things being equal, if an insurer is writing profitable new business, its market capitalization should exceed its EV. However, the market capitalization of all listed insurance companies in Israel isfar below their reported EV, and the gap is growing. The purpose of this article is twofold:a) I suggest several explanations for this apparent EV "puzzle," both competing and complementary; b)I argue that although the question of whether the EV report and MCEV methodology really indicate the fair value of the insurance company remains controversial, the EV report contains data that gives better insights into the forces driving operating performance and the impact of management actions. The EV analysis should also be considered when evaluating management performance and remuneration schemes.
31 May 2014
TL;DR: In this article, the authors focus on the analysis of the net asset value calculated at the enterprise level, as an expression of patrimonial value (book value) and stock return as a performance market validation and attractiveness to investors (market value), and weight the values obtained through both angles and express the relationship that must exist between them.
Abstract: In the current academic and professional setting, there are further numerous concerns regarding the determination of a real and fair enterprise value, especially when considering the current socio-economic context dominated by speed, complexity and uncertainty, characteristics resulting in a permanent change of context. Both literature and specialty practice offer numerous methodologies, standards and specific indicators to quantify the enterprise value based on certain considerations or assumptions, which makes the methods and techniques used to meet their demands and thus provide an enterprise’s value from their perspective  wherefrom controversy arrises over which method is better or most accurately reflects reality. This paper, developed by academics and practitioners, does not aim to establish criteria to underline the better method, nor to realize an inventory of these methods, but it aims to explain, in a structured way, the possibilities for establishing the enterprise’s value based on its patrimonial wealth assessment, its market value through stock capitalization respectively. Moreover, the paper focuses on the analysis of the net asset value calculated at the enterprise level, as an expression of patrimonial value (book value) and stock return as an expression of the performance market validation and attractiveness to investors (market value). Finally, it weights the values obtained through both angles and expresses the relationship that must exist between them.
1 Jan 2017
TL;DR: Based on the business characteristics and EVA, the authors developed an econometric model for the long-term value of grid corporations in China, and analyzed the value drivers and path selection correspondingly.
Abstract: Based on the business characteristics and EVA, the paper develops an econometric model for the long-term value of grid corporations in China, and analyzes the value drivers and path selection correspondingly. The study shows that, the growing long-term value of grid corporations derives from the creation of future value, and the fundamental factor is an increase in investment. Grid corporations should target at investment management and capital optimization, realizing the goal of long-term value.
Related Topics (5)
Performance Metrics
| Year | Papers |
|---|---|
| 2021 | 3 |
| 2020 | 2 |
| 2019 | 2 |
| 2018 | 3 |
| 2017 | 14 |
| 2016 | 20 |