高级公司理财1讲课资料

ADVANCEFINANCIALMANAGEMENTDr.R.KabirDepartmentofFinance,TilburgUniversity,TheNetherlandsTeaching:CorporateFinance/FinancialManagementEmpiricalCorporateFinanceSeminarinFinanceResearch:Corporatefinance,Corporategovernance,FinancialmarketregulationInternetaddress:www.tilburguniversity.nlWhatisFinance?FinanceisusuallyconcernedwiththewayinwhichfundsforafirmareraisedandinvestedFinanceconsistsoffourinterrelatedareas:CorporateFinance(FinancialManagement)Investments(AssetPricing)FinancialMarkets(MoneyandCapitalMarkets)BankingWhatis(Corporate)FinancialManagement?FinancialManagementprimarilyaddressesthefollowingthreequestions:1.Whatlong-terminvestmentsshouldthefirmengagein?2.Howcanthefirmraisethemoneyfortheinvestments?3.Howmuchshort-termcashflowdoesacompanyneed?Wetaketheperspectiveofafinancemanagerofafirmtounderstandtheseissues.RoleoftheFinanceManagerStandsbetweenthefirm'soperationsandthefinancialmarketsInvolvedwiththeflowofcashfrominvestorstothefirmandbacktotheinvestorsagainInvolvedwiththeuseofcashtoinvestinfirm'srealassetsDifferentformsoffirmsFirmsareusuallyclassifiedaccordingtotheirformofownership:SoleproprietorshipPartnershipCorporationTypicalFeaturesofaCorporationBoardofDirectorsManagementAssetsDebtEquityShareholdersDebtholdersAdvantagesanddisadvantagesofcorporationsAdvantages:SeparatelegalentityEasytransferofownershipCorporationhasunlimitedlifeShareholdershavelimitedliabilityDisadvantages:Doubletaxation:corporateandpersonalincometaxSeparationofownershipandcontrolleadstoagencyproblemsbetweenmanagersandshareholdersObjectives/GoalsofabusinessPopularobjectivesMaximisationof(accounting)profitMaximisationofsalesMaximisationofreturnoninvestmentSurvivalStabilityGrowthWhynotprofitmaximization?Thereareproblemsintheuseofaccountingprofit(earnings)IgnorestimevalueofmoneyIgnoresriskCalculatedonthebasisofaccountingrules“CreativeAccounting”Ignoresinvestment/growthopportunitiesofafirmObjective/GoalofaFinanceManagerMaximizeMarketValue/WealthfortheOwners(Shareholders)Marketvalueisthevaluethatshareholdersplaceontheirsecuritiestoday.Itdependsonthefuturecashflowsthattheyexpecttoreceive.Marketvalueisforwardlooking.WhyfocusonMarketValue?ThisobjectivetakesintoaccountthevaluablefeaturesofallotherobjectivesItmaynotbeaperfectdescriptionofwhatfirmsseektoachieveBut,itisprobablythemostobjectivemeasureMarketvalueofsharesiscalculatedasthesharepricemultipliedbythenumberofoutstandingshares.Whywedonotfocusonbookvalue?BookValueisthevalueofthefirmaccordingtothebalancesheetBookvalueofassetssuffersfromsameproblemslikeearningsBookvalueofassetsfailstoconsiderinflation,technologicalchangeandorganizationalcapitalBookvalueignoresintangibleassets,futureliabilities(off-balancesheet)Bookvalueisnotaforwardlookingmeasure.SourcesofFinancingShort-termandLong-termsourcesHowmuchshort-termcashflowdoesacompanyneedtopayitsbills?Howmuchlong-termcashflowdoesacompanyneedtopayforitsinvestments?InternalandExternalsourcesHowmuchoftheearningsshouldberetained?HowmuchshouldbefinancedbyEquity,Debt(Bankdebt,Bonds),Warrants,Convertibles,etc?WaysfirmscanissuesharesInitialPublicOffering(IPO):Itisthefirstpublicequityissuemadebyacompany.Publicfirms(thosealreadylistedonastockexchange)canissuesharesindifferentways:PrivateplacingPublicissueGeneralCashOfferRightsOffering1.DividendValuationModel:Sharepriceequalsthepresentvalueofallexpectedfuturedividends.ValuationofacommonshareIfweexpectnogrowthofdividends,andplantoholdtheshareindefinitely,wewillthenvaluetheshareasfollows:Po = Div/rIfdividendsareexpectedtogrowataconstantrate,wewillthenvaluetheshareasfollows:Po = Div1/(r-g)ThisformulaispopularlyknownasGordonGrowthModelValuationofacommonshareValuationofacommonshareAnExample:CurrentforecastsareforXYZCompanytopaydividendsof$3,$3.24,and$3.50overthenextthreeyears,respectively.Attheendofthreeyearsyouanticipatesellingyourstockatapriceof$94.48.Whatisthepriceofthestockgivena12%expectedreturn?ValuationofacommonshareValuationofacommonshare Ifweforecastnogrowthofdividendof$3,andplantoholdthestockindefinitely,wewillthenvaluethestockasaPERPETUITY.Assumesallearningsarepaidtoshareholders.2.ComparableFirmValuationModel:Manyrelateprice-earnings(P/E)ratioofcomparablefirmstodeterminethecurrentshareprice.

Po =ExpectedEPSxP/EAnalystsalsorelatevariablesotherthanP/EratiotosharepricePrice/CashFlowRatioPrice/SalesRatioPrice/Book(or,MarkettoBook)RatioValuationofacommonshareHowtofindcomparablefirms?UsefirmsoperatinginthesameindustryWhatconstitutesanindustry?ThereisstillpotentialformisusewithcomparablefirmsValuationofacommonshare3.DiscountedCashFlowModel:CurrentsharepriceisderivedfromthevalueofabusinesswhichisusuallycomputedasthediscountedvalueoffutureFreeCashFlowsofthefirm.Inpractice,peopleusethefollowingapproach:PV(freecashflowsforacertainnumberofyears)PV(horizonvalue)ValuationofacommonshareExample

Giventhefollowingfreecashflows,calculatethePVofneartermcashflows,PV(horizonvalue),andthetotalvalueofthefirm.r=10%andg=6%ExampleExampleEvaluatingtheDiscountedCashFlowapproachtovaluationStrengthsRecognizesthatvalueiscreatedwheninvestedcapitalearnsreturnsaboveitsopportunitycostsAttemptstovaluedirectlythebenefitsthataccruetoinvestorsCanbeappliedtoalltypesoffirmWeaknessesForecastingfuturecashflowsisnoteasyEstimatingcostofcapitalforaprivatefirmisnoteasyFreeCashFlowapproachtovaluationWhenvaluingabusiness,FreeCashFlows(FCF)shouldbethetheoreticalbasisforallPresentValue(PV)calculations.FCFisamoreaccuratemeasurementofPVthaneitherDividendorEarningsPerShare.FrameworkforValuation

(Copeland,KollerandMurrin)StepsinvaluationForecastfreecashflowsAfter-taxoperatingearnings+non-cashexpenses(depreciation)-investmentsEstimatecostofcapitalCostofequityandcostofdebtTargetweights(basedonmarketvalue)EstimatecontinuingvalueCalculateandInterpretresultsCaseStudy:KPN

FollowDCFapproachonlyConsiderforecastassumptions(long—termprospects)Forecastcashflows1993-1998After-taxoperatingearnings+non-cashexpenses(depreciation)-investmentsEstimateweightedaveragecostofcapitalCostofequity(CAPM)andcostofdebt(7.1%)Targetweights(basedonmarketvalue)Estimatecontinuingvalue(1999uptoinfinity)CalculatevaluepershareofKPNInitialPublicOffering(IPO)Basicfeatures

Goingpublicinvolvesthesharesofacompanygettingquotation(listing)onastockexchange.AllIPOsarecashoffers.

Twowayssharesaremadeavailabletopublic:“Old"shareholdersaresellingout=secondaryofferingCreationofnewshares(increaseinsharecapital)=primaryofferingWhyIPO(GoPublic)?

Toraiseadditionalcapital(forfurtherexpansionlikenewinvestments,acquisitions;repaydebt)Toallowtheownerstoselltheirstakes(diversification-risksharingbenefits)ToincreaseliquiditybenefitstoshareholdersToescapecontrol/monitoringofbanksToenhancecompany’svisibility,statusandprestigeToprovideincentivecompensationschemeformanagers/employeesBenefitsandCostsofIPOBenefitsAccesstonewsourcesoffinanceMoreliquidityforexistingshareholdersEnhancedcompanyimageandemployeemotivationCostsDirectcost(investmentbankfees,legal,administrative)Indirectcost(obligationtoprovideinformation)OngoingcostAgencycostDangeroflossofcontrolProfileofanIPOcandidate“Old"shareholderswishtocashin“Old"shareholderswishtokeepcontrol“Old"shareholderswantaninternalrestructuringofcurrentshareholderstructureCompanyneedsadditionalequityDifficultiestofindasuitablefinancialandindustrialpartnerMechanicsofgoingpublic

Thechoiceofamarket(stockexchange)Producingaprospectus

(Registration)Marketing(undertakeroadshows)Pricing(FixedorVariable)Allocation(FairorDiscriminatory)Offer/Flotationmethod(PrivateorPublic)Offer/Flotation/Introductionmethods

PrivatePlacement:customers(usuallyinstitutionalinvestors)areinvitedtoparticipateinanissue.FixedPriceMethod:offerforsaleatfixedpriceIssuingfirmpre-announcespriceandnumberofsharessoldIndividualinvestorsspecifynumberofsharestheywantIfoversubscription,rationingtakesplaceIfundersubscription,partofsharesremainsunsoldOne-stage/Two-stage(Bookbuilding)fixedpricePriceDrivenMethod/Auction/Tendermethod:offerforsalebytenderPublicisinvitedtobidatapriceoverastatedminimumpriceTheissuingpriceisdeterminedatalevelwheredemandequalssupply(principle

practice?)Offer/Flotation/Introductionmethods

RoleofinvestmentbankerInvestmentbankingservices(syndication,book-building,allocation,etc.)arespecifiedintheunderwritingcontract“Firmcommitment"clauseInvestmentbankercommitstopurchaseallunsoldsharesatpredeterminedprice(belowpre-announcedofferprice)“Bestefforts"clauseInvestmentbankeronlytakescareofthepracticalrealisationoftheoffer(e.g.collectandprocessthebidsoftheinvestors)EmpiricalIssues(1)WhichfactorsaffectthelikelihoodofanIPO?Whendofirmsgopublic?IsIPOvolumedeterminedbygrowthopportunitiesand/orstockmarketvaluation?Dofirmshavetimingability?EmpiricalIssues(2)InitialunderpricingHowtomeasureit?Whataretheexplanations?Long-rununderpricingHowtomeasureit?Whataretheexplanations?Long-rununderperformanceHowtomeasureit?Whataretheexplanations?Read“StylizedFacts”byJenkinsonandLjungsvistIfyouareinterestedandhavetimetonight,thenreadthetworecommendedpapersFortomorrowWhydocompaniesgopublic?

(Pagano,Panetta&Zingales,JF1998)PurposeAnalyseex-antecharacteristicsofIPOcompaniesAnalyzeex-postconsequencesofIPOData11years:1982-1992ComparesFirmsel