Browsing by Author "Augusto, Mário"
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- Are There Non-linear Effects of Banking Relationships and Ownership Concentration on Operational Performance? Empirical Evidence from Portuguese SMEs Using Cross-section Analysis and Panel DataPublication . Pinto, António; Augusto, MárioThis paper provides new evidence for the relationship between the stability of the banking relationship, ownership concentration and operating profitability, supporting non-linear effects between those variables in the context of small and medium enterprises (SMEs). From a sample of 4,163 Portuguese SMEs and cross-section data and panel data, we found evidence for a U-shaped quadratic relationship between the stability of the banking relationship and operational performance. This result indicates that the consolidation of new banking relationships, the difficulties experienced by SMEs in overcoming the problems of adverse selection and moral hazard reflect negatively on their operating profitability. However, when the banking relationship is solidified, and banking institutions acquire information, supervision and monitoring costs decrease, credit constraints are lower and contractual conditions are tailored to the needs of the company, with positive impacts on operating profitability. In turn, the quadratic specification established between ownership concentration and operating profitability suggests that the expropriation hypothesis prevails for low levels of control rights and the supervision hypothesis prevails for high levels.
- Are There Non-linear Relationships between Ownership Structure and Operational Performance? Empirical Evidence from Portuguese SMEs Using Dynamic Panel DataPublication . Pinto, António; Augusto, MárioThis paper analyzes the causal relationship between the ownership concentration, insider ownership and operational performance using a sample of 4.163 Portuguese SMEs and panel data models. The main results show an endogenous and dynamic relationship between those variables. The quadratic specification established between ownership concentration and operational profitability suggests that for low levels of control rights the expropriation hypothesis prevails and for high levels the supervision hypothesis prevails. It was also possible to validate the effect of entrenchment and convergence of interests in the relationship established between the insider ownership and performance.
- Bank relationships and corporate governance: a survey of the literature from the perspective of SMEsPublication . Pinto, António; Augusto, Mário; Gama, PauloThe aim of this work is to review and systematise the literature on how bank relationships, corporate governance and the interdependence between them can influence corporate performance. The banks and the enterprises establish relationships which enable them to overcome problems of asymmetrical information thereby alleviating difficulties felt in obtaining financial resources. In addition, the specificities that SMEs face, namely their ownership structure, as they are often owned and controlled by families, lead us to study the role played by corporate governance and the various control mechanisms in achieving corporate objectives. These features confer an important supervisory role on credit institutions which stem from the information they hold.
- Banking Relationships, Managerial Ownership and Operational Performance: A Simultaneous Equations Approach in the Context of SMEsPublication . Pinto, António; Augusto, MárioThis paper provides new evidence for the relationship between the nature of banking relationships, managerial ownership and operational performance in supporting reciprocal effects between these variables in the context of small and medium enterprises (SMEs). A simultaneous equations model was applied to a sample of 4,163 Portuguese SMEs and to cross-section data. Evidence was found that these attributes provide simultaneous relations among themselves. In particular, on the one hand, our results support a negative effect of the number of banks with which the company works and managerial ownership on operational performance. On the other hand, the number of banks with which the company maintains a relationship is positively conditioned by operational performance and negatively by managerial ownership. In turn, managerial ownership is negatively conditioned by operational performance and the nature of the banking relationship.
- Determinantes da relação bancaria e restrições de crédito nas PME PortuguesasPublication . Pinto, António; Augusto, Mário; Gama, PauloEste trabalho tem dois objectivos fundamentais. Por um lado, determinar as características empresariais que condicionam o número de relações bancários e, por outro, analisar os factores que determinam o racionamento de crédito das pequenas e médias empresas. Os resultados sugerem que a dimensão empresarial, a selecção adversa e o sector de actividade, influenciam o número de relações bancárias. Por sua vez, o número de relações bancárias, a dimensão empresarial e a idade estabelecem relações significativas com as restrições de crédito; não sendo relevante a natureza familiar da propriedade e a participação dos accionistas na gestão empresarial.
- Determinants Of Firm Terminal Value: The Perspective Of North American And European Financial AnalystsPublication . Reis, Pedro; Augusto, MárioCompany valuation models attempt to estimate the value of a company in two stages: (1) comprising of a period of explicit analysis and (2) based on unlimited production period of cash flows obtained through a mathematical approach of perpetuity, which is the terminal value. In general, these models, whether they belong to the Dividend Discount Model (DDM), the Discount Cash Flow (DCF), or RIM (Residual Income Models) group, discount one attribute (dividends, free cash flow, or results) to a given discount rate. This discount rate, obtained in most cases by the CAPM (Capital asset pricing model) or APT (Arbitrage pricing theory) allows including in the analysis the cost of invested capital based on the risk taking of the attributes. However, one cannot ignore that the second stage of valuation that is usually 53-80% of the company value (Berkman et al., 1998) and is loaded with uncertainties. In this context, particular attention is needed to estimate the value of this portion of the company, under penalty of the assessment producing a high level of error. Mindful of this concern, this study sought to collect the perception of European and North American financial analysts on the key features of the company that they believe contribute most to its value. For this feat, we used a survey with closed answers. From the analysis of 123 valid responses using factor analysis, the authors conclude that there is great importance attached (1) to the life expectancy of the company, (2) to liquidity and operating performance, (3) to innovation and ability to allocate resources to R&D, and (4) to management capacity and capital structure, in determining the value of a company or business in long term. These results contribute to our belief that we can formulate a model for valuating companies and businesses where the results to be obtained in the evaluations are as close as possible to those found in the stock market
- Determinants of Terminal Value in the Evaluation of Companies: A Panel Data Approach to the Context of European Companies.Publication . Reis, Pedro; Augusto, MárioThe uncertainty of the future of a firm has to be modelled and incorporated into the evaluation of companies outside their explicit period of analysis, i.e., in the continuing or terminal value considered within valuation models. However, there is a multiplicity of factors that influence the continuing value of businesses which are not currently being considered within valuation models. In fact, ignoring these factors may cause significant errors of judgment, which can lead models to values of goodwill or badwill, far from the substantial value of the inherent assets. Consequently, these results provided will be markedly different from market values. So, why not consider alternative models incorporating life expectancy of companies, as well as the influence of other attributes of the company in order to get a smoother adjustment between market price and valuation methods? This study aims to provide a contribution towards this area, having as its main objective the analysis of potential determinants of firm value in the long term. Using a sample of 714 listed companies, belonging to 15 European countries, and a panel data for the period between 1992 and 2011, our results show that continuing value cannot be regarded as the current value of a constant or growth perpetuity of a particular attribute of the company, but instead be according to a set of attributes such as free cash flow, net income, the average life expectancy of the company, investment in R&D, capabilities and quality of management, liquidity and financing structure.
- Drivers to equity valuation: perpetuities or annuities approach? An application to the main european stock marketsPublication . Reis, Pedro; Augusto, MárioAcademics and practitioners have been applying equity valuation methods mainly based on discount cash flow models, residual income models, or dividend discount models combined with balance sheet and income statement multiples of market comparables to analyse share price, provide price targets for investors, or even as a basis for transactions such as mergers and acquisitions (M&A). Most of these methods rely on mathematical deductions of growing or constant perpetuities or near perpetuities (such as annuities) to attain market values. However, it is of the utmost relevance for valuation to verify how the theoretical models relate with real values, and what their relationship is with companies’ past age. Beyond stating a non-linear relationship for valuation models and ascertain important valuation drivers, using a sample of more than 3,400 European companies with cross section data, this paper contributes to the improvement of valuation model’s effectiveness by inducing non-explicit period valuation modifications to long-term annuities and perpetuities, considering class age intervals. This paper’s originality is supported by the study of the relationship of past company age with predicted annuities, the proof of non-compliance of perpetuity-based valuation models, and the contribution of new value drivers for valuation purposes.
- Firms’ performance and board size: A simultaneous approach in the European and American contextsPublication . Augusto, Mário; Pascoal, Rui; Reis, PedroThe relation between performance and board size (BS) is analysed in the American and European contexts. It is found that return on assets (ROA) depends on BS defined as an endogenous explanatory variable. This potentially non-monotonous effect is modelled by introducing firm size and number of segments by board member as explanatory variables for ROA. BS net effect after accounting for the indirect effect resulting from these variables is negative. Differences in the results obtained for Tobin’s Q, strategic investors’ weight and equity to total assets, between America and Europe, suggest a more preventive management control in Europe.
- O Impacto das Relações Bancárias e do Governo da Empresa no Desempenho: O caso das PME’s Portuguesas.Publication . Pinto, António; Augusto, Mário; Gama, PauloEste trabalho tem por objectivo analisar o modo como as relações bancárias e o governo da empresa, condicionam o desempenho empresarial, tendo por base uma amostra de 4.163 pequenas e médias empresas (PME’s) portuguesas. As PME´s têm sido nos últimos anos, objecto da atenção de numerosos trabalhos, pela capacidade que têm de gerar emprego e pelo papel que desempenham como criadoras de riqueza. Em sistemas de mercado, as questões de sobrevivência, a complexidade e o dinamismo da envolvente empresarial obrigam a um conhecimento cada vez mais profundo das organizações bem como das variáveis ou factores que se convertem em elementos chave do seu desempenho. Numerosos autores são unânimes em realçar os factores de carácter interno que condicionam o desempenho empresarial destacando: as relações bancárias (Degryse & Ongema, 2001; Ongema & Smith, 2001), o governo da empresa (Bhagat & Bolton, 2008), os recursos humanos (Rogoff, Lee & Suh, 2004), o marketing (Kara, Spillan & Deshields, 2005), a qualidade, a inovação e os recursos tecnológicos (Donovan, 1996), os valores culturais e os sistemas de informação (Tse & Soufani, 2003). Este estudo volta-se para os dois primeiros. Os bancos e as empresas estabelecem relações que permitem superar problemas de assimetria de informação aliviando, desse modo, as dificuldades sentidas na obtenção de recursos financeiros. Face às dificuldades em aceder ao mercado de capitais, o mercado de crédito constitui a principal fonte de financiamento das PME's, pelo que o estudo da intermediação bancária ganha particular relevância, nomeadamente quando se pretende avaliar o seu contributo no desempenho daquelas empresas (Boot, 2000). Paralelamente, as especificidades que estas empresas encerram, nomeadamente a natureza familiar que a estrutura de propriedade e controlo lhes confere, remetem-nos para o estudo do papel exercido pelo governo da empresa e dos diferentes mecanismos de controlo, no cumprimento dos propósitos empresariais. Como referem Denis e McConnel (2003) este desenrola-se em torno de duas grandes correntes de investigação: i) uma preocupada com as variáveis relacionadas com a estrutura de propriedade e ii) outra realçando os aspectos mais institucionais, como sejam os ligados ao conselho de administração e ao director geral. O modelo proposto pretende evidenciar o poder explicativo de um conjunto de atributos que caracterizam as relações bancárias e o governo da empresa, no desempenho empresarial, com recurso a uma amostra de empresas portuguesas utilizando o modelo de regressão múltipla. Os resultados indicam que o número de bancos com que a empresa trabalha e a duração da relação bancária influenciam negativamente a rendibilidade empresarial. Relativamente aos elementos caracterizadores do governo empresarial, verifica-se que o desempenho é condicionado negativamente pelo número de accionistas/sócios e pela participação dos gestores no capital da empresa e, positivamente, pela natureza industrial da propriedade e pela dimensão do concelho de administração.