公司财务的经验主义（PPT113）(1)

1、Empirical Corporate FinancePrepared by Xue Shuang （薛爽）Zhu Kai（朱凯）1Grade Class participation (20%)Proposal (30%)Final Examination (50%)2Requirement for ParticipationOrdinary participationPresentation for the selected papersCapital Structure (3 topics)IPO (1 topics)SEO (1 topics)Dividends (1 topics)Ta

2、keover (1 topics)3Sheridan Titman; Roberto Wessels, The Determinants of Capital Structure Choice, The Journal of Finance Vol. 43, No. 1 (Mar., 1988), pp. 1-19 Owen Lamont, Cash Flow and Investment: Evidence from Internal Capital Markets, The Journal of Finance ,Vol. 52, No. 1 (Mar., 1997), pp. 83-10

3、9 Tim Loughran; Jay R. Ritter, The New Issues Puzzle, The Journal of Finance, Vol. 50, No. 1 (Mar., 1995), pp. 23-51. Roni Michaely; Wayne H. Shaw, The Pricing of Initial Public Offerings: Tests of Adverse-Selection and Signaling Theories, The Review of Financial Studies, Vol. 7, No. 2 (Summer, 1994

4、), pp. 279-319 Shlomo Benartzi. et., 1997 Do changes in dividends signal the future or the past. The Journal of Finance,vol52. Healy, Paul,1992,Does corporate performance improve after mergers? JFE 31,135-175. 4Requirement for ProposalDatabaseMain findings Procedure of programming (SAS is prefered)5

5、ReferencesMain: Advanced Corporate FinanceOther:Empirical Corporate Finance(Vol I-IV)Handbook of Economics of Finance, 1(A+B)Copeland,Weston, Shastri, Financial Theory and Corporate Policy6Journals in FinanceTopsJournal of Finance (Jstor)Journal of Financial EconomicsReview of Financial Studies (Jst

6、or)B JournalsJournal of Corporate FinanceJournal of Financial ResearchFinancial ManagementJournal of Quantitative and Financial Analysis (Jstor)Journal of Banking and Finance7Related JournalsAmerican Economic Review (Jstor)Quarterly Journal of Economics (Jstor)Journal of Law and EconomicsJournal of

7、Business (Jstor)8Working Papers on NET9Journals in Chinese经济研究经济学季刊金融研究会计研究中国会计与财务研究（CAFR）中国会计评论上证研究深圳交易所研究报告（ ）10 There is no fact, But interpretation11An Example12抗日战争期间国民党军队弹药消耗统计（歼灭日军100万）13百团大战期间八路军弹药消耗与歼灭敌军统计共毙伤日伪军25799人（其中日军20636人）。共消耗子弹401370发，各种炮弹19130发，手榴弹126602发。平均每27.19发子弹毙伤一个日伪军14车桥战役期间

8、新四军弹药消耗与歼灭敌军统计毙伤俘日军465人，伪军483人，总计为948人。消耗子弹共9993发，手榴弹2144发。平均每13.2发子弹毙伤一个敌人，每21.5发子弹消灭一个日军。15晋察冀边区抗战七周年统计作战次数达22554次，毙伤敌伪军214027名，俘虏敌军560名，俘虏伪军40147名，反正的伪军18294名。消耗的炮弹6549发，掷弹21265发，手榴弹322691发，子弹7501750发。晋察冀根据地军民七年来每毙伤一名敌伪军耗弹35发，每毙伤俘一名日伪军耗弹27.48发。16结论共军每2050发子弹毙伤一个敌人的结论是可信的。有较大的可信度的，符合战场上的实际情况。国民党部队

9、的作战效率远低于共产党部队，如果国民党更慷慨地提供共产党弹药的话，抗日战争的胜利会来得更大。1718Financial Decisions in Different InstitutionsUSA and China19Number of US Nonfinancial Firms 1980-200020The Evolution of US FirmsPublicly traded firms increased from 3,561 in 1980 to 6,146 in 2000Only about one-third of the 3,561 firms remained alive

10、in 2000A total of 7,355 firms IPOed during this periodWhat happened to the other firms?M & A (3,796 firms)Bankruptcy (639)Buyouts, privatized (335)21The Evolution of Chinese FirmsAlthough I dont have the data at hand, the following is probably true:No effective and timely exit for Chinese firmsNo co

11、rporate control marketAs a result, many poorly managed firms in ChinaMore evidence later22Ownership Structure, 199923Ownership in China24Ownership ComparisonOwnership structure in the US is not as disperse as it is widely believedOn average, insiders of non-S&P firms owned 48.2% of equity!Even for S

12、&P 500 firms, average insider ownership is 21%!Although ownership in China is more concentrated, the more important distinction probably lies in the nature of ownership! (Private vs. State)25CFOs Views on Capital Structure26Percentage Asset Components27Percentage Asset Components28Differences in Ass

13、et StructureChinese firms haveMuch lower intangiblesHigher cash, inventory, and fixed assetsSimilar A/Rs!Why?Accounting standards?Lack of property rights protection?Mis-management?Internal capital markets more important?Misclassifications?29Percentage Liabilities and Equity Components30Percentage Li

14、abilities & Equity Components31Differences in Capital StructureChinese firms haveHigher equityMuch lower “Other noncurrent liabilities”Similar debt and current liabilitiesWhy?State ownership is high. But are they equity or debt? Equity is cheaper in China?No pension liabilities!32Sources of Funds33S

15、ources of Funds34Differences in Fund SourcesUSNet cash flows from operationsSales of investments (both equity and debt)Proceeds from long-term debt issuanceIncreases in other long-term debt and current debtStock issuanceSales of PP&EChinaIncreases in long-term and current debt (bank borrowings)Net c

16、ash flows from operationsSales of investments Stock issuanceSales of PP&E35CFOs View on Investment Decisions (US)36Investment and Performance19801990GMIBMXeroxKodakGEAT&TR&D39.836.87.110.211.819.4CAPX826410162291NET INV2325.51.56.78.333.4Gro INV62.862.38.616.820.252.8Value at End20.864.63.213.550.13

17、2.9VAD(I)-109-73-21-273-67VAD(II)-94.4-35-15-1915-28.4VAD(III)-91.4-25.3-16.6-1324-4537Uses of Funds38Uses of Funds39Differences in Fund UsesUSIncreases in investmentsCapital ExpenditureReductions in long-term debtCash dividends and stock repurchasesAcquisitionsChinaReductions in debtCapital expendi

18、tureIncreases in investmentsCash dividendsAcquisitions40US Composite Market-to-book Ratios41Chinese Composite Market-to-book Ratios42Appropriate Prices of Non-tradable State Shares?US market-to-book is around 3Surprisingly, if we price the non-tradable shares at the market level, the M/B ratio is al

19、so close to 3 in China!M/B is around 1.5 if we price the non-tradable shares at their book valueQuestionsAre the book values equally accurate?Comparable ages of the firms?Industry differences?43ROE and P/E Ratios44ROE45P/E Ratios46Dividend Payout and Dividend Yields47Dividend Payout Ratios48Dividend

20、 Yield in China49Chapter 2 Valuation and Financing Decisions in an Ideal Capital Market50Learning ObjectiveValuation Models in Ideal Capital Market.MM Theorem(1958)-Capital Structure Irrelevance and Determinants of Cost of EquityPortfolio Theory and CAPMOption Pricing Models51Noble Prize WinnersPort

21、folio theory, Markowitz,(1953; 1990 Noble Prize winner)MM on capital structure, (1958,1961; 1985&1990 Noble Prize winner)CAPM, Sharpe,(1964; 1990 Noble Prize winner)Option Pricing Theory, Black-Scholes-Merton,(1973; 1996 Noble Prize winner)52ASSUMPTIONSCapital market are frictionlessAll participants

22、 share same expectationsAll participants are atomisticThe firms investment program is fixed and knowThe firms financing is fixed53Why do we care the unrealistic (ideal) capital market? Of course, it is never claimed that the real world follows these assumptions. What is hoped is that by modeling the

23、 universe of the firms in such a way, and by relaxing the assumptions one by one, it is possible to identify and discuss the weight or relevance of each of the different factors in the search for the optimal financial decisions.54Why We Care about Capital Structure?The value of project is determined

24、 by the cash flow and the intertemporal cost of money available for the project.Cost of money is an opportunity cost.Different type of money maybe have different opportunity cost.Does mixture of different source of money have additional value for optimization of investment?55Source of MoneyInternal

25、vs. ExternalDebt vs. Equity56Classical Capital Structure PerspectivesDurant(1952) summarized current perspectives on capital structure:Net Profit ApproachOperating Profit ApproachTrade-off Approach57Net Profit ApproachNet profit belongs to shareholders, and the more net profit, the more wealth of sh

26、areholders. So optimal structure is to maximize the net profit.B/S100KeKbKw58Operating Profit ApproachFirm value is determined by the ability of value creation of asset and capital structure is only to distribute the operating profit. So there is irrelevance between capital structure and firm valueK

27、bKeKwB/S59Trade-off ApproachAs the increasing of debt, the cost of equity increase, but the marginal effect of debt matter more and cost of capital decrease. Above the optimal point, the marginal effect of cost of equity matter more and cost of capital increase.KwKbKeB/SB/S*60Preliminary RemarksTher

28、e are ideas, no formal analysis and not tested.61Development of Capital Structure TheoryMM(1958): Irrelevance ModelMM(1963): Relevance ModelMiller(1977): Personal vs. Corporate Tax62MM Theorem (1958)MM Proposition I:The market value of a firm is constant regardless of the amount of leverage (i.e., d

29、ebt relative to equity)that the firm uses to finance its assets63Irrelevance StatementASSUMPTIONSame class of risk;Complete and Perfect Market; No tax;Absence of Arbitrage;64Firm ValueFor unleveraged firm: For leveraged firm:65Arbitrage AnalysisIf If you are investors on leverage firm and hold a fra

30、ction of its existing shares, and its value is .How will you do?66Arbitrage Analysis (cond)Borrow at the risk-free interest rateBuy of the existing equity at cost ofSell Is there any arbitrage profit?67EXAMPLE68套利过程作为一位理性的投资者，目前持有L公司1%的股票，市场价值为400元。将会怎样进行套利呢？出售L公司股票，获得400元现金；按照12%的利率借款300元；购买NL公司股票，

31、支付666.67元，其余33.33元用于其他投资(或者消费以增加效用)；69套利前后的收益4. 套利之前，持有L公司股票的收益为400*16%=64元5. 套利之后，从NL公司获得的收益为666.67*15%=100元，扣除借款所需要支付的利息费用36元，净收益为64元。套利的结果：NL公司股票价格上升；而L公司股票价格下降，两公司的价值相同。70Cost of CapitalCost of firm or project(WACC)71MM Theorem (1958)MM Proposition II:The expected return on a firms equity is an

32、increasing function of the firms leverage.72Analysis of MM Proposition IIIs it true?If WACC is constant and WACC is great than cost of debt, MM Proposition II is correct.73Formal Analysis74Risk-neutral InvestorsIf investors are risk neutral, that is, they do not demand a premium for risk of the firm

33、s assets, thenThe risk of both debt and equity are function of risk of firms assets,It is inconsistent with MM Proposition II75Risk Premium and risk-free debtExpected return on assets( ) contains a risk premium, and expected return on equity also has a risk premiumDebt is risk freeConsistent with MM

34、 proposition II 76Risk Premium and risk-free debtAssumption 1Investors demand a premium for firms risk is increased function of firms leverageMM proposition II may be not hold77ConclusionsThe present model structure is insufficient to prove that MM Proposition II is true.However, we need to know the

35、 nature of firms risk and that of its debt and equity, as well as the markets required return for risk in form of a premium.Change in leverage simply involve redistribution of the firms total risk among the claimants.78MM under Income Tax(1963)79AssumptionDefinition of risk class80Effect of Income T

36、ax81Effect of Income Tax on value of SecuritiesWithout Leverage82Effect of Income Tax on value of SecuritiesBondFirm with Leverage83Equilibrium with ArbitrageIf Yield on portfolio 1(without leverage)Alternative Portfolio(P2)84Equilibrium with ArbitrageAlternative Portfolio(P2)Yield on P285Equilibriu

37、m with ArbitrageArbitrageIf and only if 86Portfolio Theory and CAPMMM theorem is partial equilibrium model (Stiglitz,1969)CAPM is a general equilibrium model on risk-return for all securities.87Constructions of Portfolio TheoryStatistical effects of diversification on the expected return and risk of

38、 a portfolio;Attitude of investors towards the risk, i.e., risk averse.88Statistics for a portfolio of Two SecuritiesExpected returnThe standard deviation of the portfolio,Subject to:89Statistics for a portfolio of N- SecuritiesExpected returnStandard deviation90Statistics for a equally weighted por

39、tfolio of N-SecuritiesExpected returnStandard deviation is average variance 91Risk Aversion and optimal portfolio in the absence of risk-free securitiesOptimal portfolio for less averse investorsOptimal portfolio for more averse investorsIndifference curveEfficient FrontierInefficient area92Portfoli

40、o Separation Theorem:Optimal Portfolio with Risky and Risk-free SecuritiesExpected returnStandard deviation93Portfolio Separation TheoremOld optimal portfolio for less averse investorsOld optimal portfolio for more averse investorsIndifference curveOld efficient frontierInefficient areaTNew efficien

41、t frontierNew optimal portfolio for less averse investorsNew optimal portfolio for more averse investors94Capital Market EquilibriumCapital Market LineSecurity Market Line95Option Pricing-Binomial approachExpected return is binominal distributionIf nature is good,If nature is bad,96Valuation with Binomial Pricing ModelCase 1: risk-free debt If97Valuation with Binomial Pricing ModelCase 2: Default-risky debtIf it is good, debtor get X, shareholders getIf it is bad,Debtor get shareholders get 0.98Valuation with Binomial Pricing ModelHe