公司治理结构与价值分析(ppt 76页)（英文版）.ppt

1、CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,1,Corporate Governance and the Value of Firms-Some Experiences of U.S and Asia,Professor K.C. John Wei, PhD Tel: (852)-2358-7676; Fax: (852)-2358-1749 E-mail: johnweiust.hk Department of Finance, HKUST and Visiting Department of Finance, Peking

2、University Prepared for CCER, Peking University November 8, 2003,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,2,Profile of Prof. K.C. John Wei,Prof. K.C. John Wei received his PhD in Finance at the University of Illinois, Champaign-Urbana, in 1984. He served the University of Mississippi a

3、s an Assistant Professor from January 1984 to June 1988. After serving the University of Miami as an Assistant Professor for one year, he moved to Indiana University, where he served as an Associated Professor from July 1989 to June 1992. Since July 1992, Prof. John Wei has been serving the HKUST Bu

4、siness School initially as an Associate Professor and later was promoted to full Professor. He served as Acting Head of the Department of Finance from January 2001 August 2002 and February June 2003. Prof. Wei has also been appointed the Director of the Centre for Asian Financial Markets since 1995.

5、 He was visiting University of Texas at Austin from September to December 2002 and is currently visiting Guanghau School of Management, Peking University. With research focuses on empirical research in capital markets, derivatives and asset pricing of Asian and U.S. markets, Prof. Wei has produced a

6、 number of high quality papers on these areas. Many of these papers were published in top journals in finance and have made considerable contributions to the finance literature. He is an author of four books (in Chinese) on Hong Kong stock and warrants markets and Taiwanese stock market. In addition

7、, Prof. Wei is a regular column writer for the Hong Kong Economic Journal, a local newspaper specialised in financial news. On the consultancy activities, Prof. Wei has helped Hang Seng Bank to develop a personal financial planning model called “SmartInvest,” and HSBC to develop a financial planning

8、 model, called “Rule-Based Investment Solutions.” He also conducted a consultancy project initiated by HKSAR for APEC and a few projects for Hong Kong Stock Exchange. Prof. Wei have been involved executive teaching for HKUST, Peking University, Hong Kong Stock Exchange, Chinese provincial government

9、 officials, general corporate executives, Xiean Jassen, Daimler/Chrysler, China Mobile, Aspire, and BenQ.,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,3,Value creation and business strategies,Valuation Creation,Qijia,CEO,Xiushen,Zhiguo,Pingtianxia,Management team,Assets in place,Growth opp

10、ortunity,Capital,People,Management skills Vision Integrity,Corporate governance Incentives,Restructuring Competitive advantages,M in the right industry) Low cost operator: Hon Hai Precision, Taiwan Semiconductor, Dell, BYD (make money from good management) Low financing cost: GE Barrier to entry: (1

11、) capital, (2) technology (patents), (3) distribution channels, (4) government protection Example: Profit margin = 20%; WACC = 15%; Capital turnover = 2 times For every $100 sales, profit = $20, required capital investment = $50, cost of capital = $50*15% = $7.50, abnormal profit = $20 $7.5 = $12.5.

12、 At what level of profit margin, will the firm become a mature company?,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,9,Abnormal profit: Motorola, Ericsson and Nokia,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,10,Earnings quality,Are your company future incomes easy to forecast?

13、Are they sensitive to business or industry cycle? (Microsoft vs Intel; GM vs Coca Cola) Economy-wide risk: Business cycle (GM vs Merck) Operating risk: Level of capital intensity (TSMC vs Yu Yuan) Financing risk: Leverage (NWD vs SHK Properties) Accounting information risk: Disclosure and corporate

14、governance (CAS vs IAS; TSMC vs UMC) Inventory Accounts receivables Gross margin S but the cost can be high) Divestures Layoffs Developing a value-oriented approach to leading and managing their companies after restructuring Establishing priorities based on value creation Gearing planning, performan

15、ce measurement, and incentive compensation systems toward shareholder value Communicating with investors in terms of value creation,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,37,When are Companies in Need of Restructuring?,Score of 6-24 with 24 being the worst (based on Monitor) Total re

16、turn to shareholders (TRS) Sales growth relative to industry (growth) Operating margin relative to industry (operating efficiency) Capital return relative to industry (ROIC) Number of business units (focus?) Distance from median industry capital structure (WACC, optimal capital structure),CFAII_SS18

17、: OptionsHKUST Business School,K.C. John Wei,38,Restructuring Process,Diagnostic Scan (Decision to restructure) Restructuring (Implementation plan) Value-based Management (VBM implemented) Incentive Design (New incentive system),CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,39,Restructuring

18、 Framework,Current market value,Total potential value,DCF value using analyst forecasts,Value with internal and external improvements,DCF value using management expectation,Value with internal improvements,Market Inefficiency Takeover speculation Internal improvements Corporate governance,Optimal op

19、portunity,Public held business,Growth opportunities + Financial Engineering Capital structure Dividend policy Risk management,Disposal / new owners M&A Joint venture Spin-offs IPOs Letter stock Divesture,Operating improvements Revenue growth Cost reduction Capital efficiency,Perception Gap Overvalue

20、d Undervalued,Value created Through Restructuring,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,40,Restructuring Framework: Example,This company had 10 business units and its stock price was declining,Market Value $1,000,Maximum Value Potential $1,800,DCF value using analyst forecasts $1,05

21、0,Value with internal and external improvements $1,650,DCF value using management expectation $950,Value with internal improvement $1,200,Market Inefficiency $50,Value created $800,Growth opportunities + Financial Engineering $150 Not enough debt,Internal improvements $450 Sold 3 losers,Internal imp

22、rovements $250 Exit unprofitable product lines Reduce inventory,Perception Gap -$100 Overvalued,Value created Through Restructuring,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,41,Improve Operations: Internal Improvements,Challenge every part of the business system Procurement Raw material

23、s Manufacturing/Work-in-progress Finished goods (are they competitive?) Inventory Distribution channel and sales Accounts receivable,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,42,Rethink your portfolio of businesses: External Improvements,Focus on two dimensions to look for value improve

24、ment Value creation potential Competitive advantage Decision: High value creation + best in competitive advantage: should grow High value creation + weak in competitive advantage: should improve Low value creation businesses: should dispose,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,43,O

25、wnership Alternatives: External Improvements,Spin-offs Avoid cross subsidization (IBM/PC) Eliminate management constraints (ATT&Lucent) Tax free Announcement effect is positive (may exceed value of entity to be spun off) Initial Public Offerings Allow direct investment in a subsidiary Tax free if IP

26、O keeps cash (which may be used to repay corporate debt) Allow consolidation (tax and accounting) if less than 20% of equity is sold Direct Sales Taxable (may provide tax shield),CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,44,Financial Engineering,Minimizing Weighted Average Cost of Capit

27、al Does Not Maximize Value of Firm (Bankruptcy cost),Cost of equity,WACC,After-tax cost of debt,Minimum WACC,Maximize Value,Debt/Equity,Percent,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,45,Sources of Restructuring Value,In the U.S., the average breakdown of sources of value creation fro

28、m restructuring indicates that approximately 60% comes from strategic and operating improvements,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,46,Put the Value Creation Plan into Action,Put Value into Planning Focus planning and business performance reviews around value creation Develop Val

29、ue-Oriented Targets and Performance Measures Focus on a measure that incorporate both growth and return on invested capital (ROIC) EP (Economic profit ) = Invested capital (ROIC Opportunity cost of capital) Tie Compensation to Value Assess Value of Strategic Investments Develop Investor Communicatio

30、ns Strategy Reshape the CFOs Role,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,47,Summary for Restructuring,Managing value consists of three broad steps: Taking stock of the value-creation situation within the company and identifying restructuring opportunities Acting on those opportunitie

31、s (operational efficiency improvements, divestures, acquisitions, reorganization) Instilling a value-creation philosophy A managing-value focus does not create value through financial manipulations. It creates value through developing sound strategic and operating plans Most companies would benefit

32、from a through review of restructuring opportunities Managers need to ensure that they identify and act on value-creation opportunities regularly,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,48,Approaches to Valuation,Discount Cash Flow (DCF) valuation Comparative measures or relative valu

33、ation Real Options Analysis (ROA) valuation,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,49,Discounted Cash Flow (DCF) Valuation,Estimating Free Cash Flow,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,50,Measuring Value,F1,Firm,Cash flows,Invested Capital Fixed Assets Operating Wo

34、rking Capital,Year 1,Year 2,Year 3,Year 4,Year 5,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,51,Discounted Cash Flow Model,Value of operations = Discounted value of expected future free cash flow (FCF) Cash flows Timing Risk,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,52,Free C

35、ash Flow - Definition,Free cash flows are: after-tax cash flow from operations remaining after all re-investment needs have been met. available for distribution to all providers of capital (both shareholders and bondholders).,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,53,DCF Valuation,0,

36、1,2,T,Terminal ValueT=FCFT+1/(WACC-g) FCF1 FCF2 FCFT-1 FCFT,T-1,FCF = Free cash flow WACC = Weighted Average Cost of Capital TV = Terminal Value (at time T) = FCFT+1/(WACC g), where g is the long-term growth rate in sales T = Length of the forecast horizon (typically, 7 to 10 years),CFAII_SS18: Opti

37、onsHKUST Business School,K.C. John Wei,54,Sensitivity analysis,Examine sensitivity of valuations to different assumptions about: Sales growth (affects FCF) Profit margins or operating efficiency or operating cost (affects FCF) Asset turnover ratios (I.e., capital expenditure or working capital inves

38、tment) (affect FCF) Weighted average cost of capital,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,55,Fundamental Drivers of a Companys Value,Value Drivers,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,56,Basics of Value Creation,A firm creates value only if it earns a return on it

39、s invested capital that is higher than the cost of financing the investment. That is, ROIC WACC Three value drivers: Growth Abnormal return (ROIC WACC) WACC (risk),CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,57,Value Creation,Assets,Invested Capital $100 million,After-tax operating profit

40、 (NOPLAT) $18 million,Return on Invested Capital 18%,Debt $50 million,Equity $50 million,Cost of Debt (after-tax) 6%,Cost of Equity 16%,Invested Capital $100 million,Weighted Average Cost of Capital 11%,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,58,The Return Spread,Return Spread = Retur

41、n on Invested Capital (ROIC) Weighted Average Cost of Capital (WACC) When ROIC WACC, the firm creates value. When ROIC = WACC, the firm neither creates value, nor destroys value. When ROIC WACC, the firm destroys value. Economic Profit or EVA = (ROIC WACC) Invested Capital,CFAII_SS18: OptionsHKUST B

42、usiness School,K.C. John Wei,59,Value Metrics,EPS (Earnings per share) Profit Margin (Return on Sales) Book-to-Market (B/M) Price-Earnings ratio (P/E) ROIC (Return on Invested Capital) Economic Profit or EVA (Economic Value Added) DCF (Discounted Cash Flow) CFROI (Cash Flow Return on Investment) TRS

43、 (Total Return to Shareholders) ,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,60,Value Driver Analysis,Economic Profit = (ROIC - WACC) Invested Capital Value drivers: Abnormal return: Invest only when ROIC WACC Growth: g Risk: WACC,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,61,

44、ROIC Tree,ROIC,EBIT/Invested Capital,Cash Tax Rate,EBIT/Sales,Sales/Invested Capital,Operating Working Capital/Sales,Net PPE/Sales,Other Assets/Sales,COGS/Sales,Depreciation/Sales,SGA Expenses/Sales,ROIC = Profit margin x Asset Turnover,Value,Growth,ROIC,WACC,CFAII_SS18: OptionsHKUST Business School

45、,K.C. John Wei,62,Mergers and Acquisitions,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,63,Identifying Value Creation Possibilities,What makes two firms worth more together than apart? Synergy (relatedness, economies of scale and scope): Gillettes acquisition of -Duracell Economies of vert

46、ical integration (merger of companies at different stages of production): Times acquisition of Warner Brothers Complementary resources (The target may have a unique product but lack the engineering and sales organization to produce and market it on a large scale.) Quicker and cheaper to merge with a

47、 firm that already has a lot of talent than to develop engineering and sales talent from scratch.,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,64,Evidence on Value Creation in M&A Transactions,The combined value of companies engaged in mergers and tender offers increases by about 7 percent

48、 around takeover announcements. How is the value shared? Targets get the bulk of it. Acquirers get roughly zero.,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,65,Reasons For Failures,Overoptimistic appraisal of market potential: skeptical about Rebound from a cyclical slump Turn around Rapi

49、d growth continues Overestimation of synergies Overlooking problems: due diligence Overbidding: escalation commitment Poor post-acquisition integration,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,66,Value Creation or Enhancement,Summary,CFAII_SS18: OptionsHKUST Business School,K.C. John W

50、ei,67,Value Enhancement: Summary,Increase cash flows from existing investments (NOPLAT) Poor invests: keep, divest, or liquidate Improve operating efficiency: operating margin Reduce the tax burden Reduce net capital expenditures on existing investments Reduce noncash working capital Increase expect

51、ed growth (g and ROIC) Tradeoff on reinvestment: reduce free cash flow but increase expected growth Not all growths are good: only ROIC WACC is good,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,68,Value Enhancement: Summary,Prolong the period of high growth (N) Brand name advantage Patents

52、, licenses, and other legal protections Switching cost Cost advantage Reduce the cost of financing (WACC) Change operating risk Reduce operating leverage Change the financial mix Change financing type,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,69,Value Creation: Conclusion,Assets in plac

53、e Restructuring (increase operating efficiency) Growth opportunity (g) New investments with ROIC WACC (value creation) R&D and new opportunity Merger and acquisition Prolong competitive advantage Reducing WACC Improve corporate governance Reach optimal capital structure Risk management to reduce risk Value, Value, and Value,CFAII_SS18: OptionsHKUST Business School,K.C. John Wei,70,Value Creation Chart,Assets in place,Value Creation,Growth options,Cost of capital,Restructuring to improve operating efficien