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Drivers to equity valuation: perpetuities or annuities approach? An application to the main european stock markets

2019Journal article Restricted access
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dc.contributor.authorReis, Pedro
dc.contributor.authorAugusto, Mário
dc.date.accessioned2019-06-19T12:35:36Z
dc.date.available2019-06-19T12:35:36Z
dc.date.issued2019
dc.description.abstractAcademics 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.pt_PT
dc.description.versioninfo:eu-repo/semantics/acceptedVersionpt_PT
dc.identifier.citationReis, P. N.; Augusto, Mário António Gomes (2019). "DRIVERS TO EQUITYVALUATION: PERPETUITIES OR ANNUITIES APPROACH? AN APPLICATION TOTHE MAIN EUROPEAN STOCK MARKETS". Journal of Business Universidad del Pacifico 11 (2).pt_PT
dc.identifier.urihttp://hdl.handle.net/10400.19/5558
dc.language.isoengpt_PT
dc.peerreviewedyespt_PT
dc.publisherJournal of Business Universidad del Pacìficopt_PT
dc.subjectAnnuitypt_PT
dc.subjectPerpetuitypt_PT
dc.subjectEquity valuationpt_PT
dc.subjectDCFpt_PT
dc.subjectRIMpt_PT
dc.subjectDDMpt_PT
dc.titleDrivers to equity valuation: perpetuities or annuities approach? An application to the main european stock marketspt_PT
dc.typejournal article
dspace.entity.typePublication
oaire.citation.conferencePlaceLima (Peru)pt_PT
oaire.citation.issue2pt_PT
oaire.citation.titleJournal of Business Universidad del Pacificopt_PT
oaire.citation.volume11pt_PT
person.familyNameReis
person.givenNamePedro
person.identifier.ciencia-idB71F-60A3-3FB5
person.identifier.orcid0000-0003-1301-6645
person.identifier.ridN-9211-2018
person.identifier.scopus-author-id56747454000
rcaap.rightsclosedAccesspt_PT
rcaap.typearticlept_PT
relation.isAuthorOfPublication84bd8fcc-7ce1-49f7-9669-9ccf9b9ce2f0
relation.isAuthorOfPublication.latestForDiscovery84bd8fcc-7ce1-49f7-9669-9ccf9b9ce2f0

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