Hoeveel is een bedrijf waard?

Het onderzoek van Olga Ihl-Deviv’e was gericht op bedrijfswaarderingen. De geschatte waarde van een bedrijf is de basis van een groot aantal beslissingen. Financiers kijken naar de waarde als ze beslissen om wel of niet te investeren in een bedrijf. Bedrijven kijken naar de waarde als ze een fusie of overname overwegen. De geschatte waarde bepaalt ook de hoogte van het bedrag van de investering of de overname. Bepalen wat de intrinsieke waarde is van een bedrijf is een complexe en uitdagende taak. 

De rol van de gebruikte input, de bestuurders en de financiële adviseurs

Wat bepaalt de accuraatheid en precisie van een bedrijfswaardering? En hoe kun je dat proces verbeteren? Olga Ihl-Deviv’e onderzocht de relatie tussen de aard van de input die gebruikt wordt bij de waardebepaling, de corporate governance, de kenmerken van de financiële adviseurs en anderzijds de accuraatheid en precisie van de geschatte waarde. (Lees meer over haar conclusies in het Engelstalige vervolg.) 

Vakgroep Account & Finance

Olga Ihl-Deviv’e werkt sinds maart 2021 bij de vakgroep Accounting & Finance van de faculteit Managementwetenschappen. Daar versterkt zij het onderzoek op het gebied van financial accounting en valuation. Tevens is ze als docent betrokken bij de accounting cursussen op zowel bachelor als master (MBA) niveau.

Haar onderzoek en de belangrijkste conclusies / dissertation and research (EN)

Firm valuation is the foundation of numerous decisions, all of which vary in their level of magnitude and impact. Individual investors rely on stock valuations to identify an investment opportunity, firms evaluate their financial health and value-generating sources when deciding on their dividend policies, and acquiring firms value potential targets and estimate their prices to make a value-creating acquisition. At the heart of all these decisions lies the attempt to obtain an estimate of the true value of a firm. Yet, firm valuation is a very complex and challenging task because it is affected by many factors, which often make it difficult to accurately estimate a company’s intrinsic value. Information asymmetry, the various sources of information and the incentives and attributes of different parties responsible for the disclosures of relevant information are only a few examples. The accuracy of an estimate of a firm’s value, and consequently the quality of an investment decision or acquisition, is not only relevant to various capital market participants, but is also of great importance to the economy as a whole. For instance, the total value of mergers and acquisitions announced by a U.S. acquirer in 2015 reached $2.5 trillion, which is 13% of GDP. While successful mergers create value for shareholders, misguided acquisitions, which are those that incorrectly determined the offer price or the potential for synergies, can lead to a substantial misallocation of capital and destruction of shareholder value. Hence, it is pivotal to continue expanding our knowledge on what drives the accuracy and precision of valuation, and how it can be improved. 

In my dissertation, I explore the relation between the nature of valuation inputs, corporate governance and financial adviser attributes, and the precision and accuracy of valuation estimates. First, I investigate whether the relative valuation approach improves if financial information provided by the tracking service I/B/E/S is used as the primary valuation input, as opposed to the financials required by GAAP. Second, I focus is on valuations provided by financial advisers in a fairness opinion as these are relevant not only to the board of directors but also to target shareholders when deciding on the proposed tender offer. I examine to what extent the characteristics and incentives of a target board shape the precision of valuations in a fairness opinion. In addition, I investigate how shareholders perceive the usefulness of fairness opinion valuations, as captured by shareholder class action lawsuits. I also analyze the role of reputation and expertise of fairness opinion providers, that is financial advisers, and investigate the association between advisers’ expertise and valuation precision and timeliness of deal completion.

Concerning the role of valuation inputs, I find that street earnings lead to a different set of selected peers compared to GAAP, which is not surprising given the fundamental differences in the derivation of these two sets of earnings. However, this different peer selection does not automatically lead to a superior peer-based valuation. On average, I do not find support for the relative superiority of street peers compared to GAAP peers. It is only when significantly different peers are selected that street-earnings based multiples outperform their GAAP counterparts. In addition, my findings reveal that while the use of street earnings has the potential for identifying mispricing, no such evidence is found in the case of GAAP earnings. The analyses further show that street earnings are particularly superior in terms of valuation performance and identification of mispricing when target firms are volatile, R&D intense, or internationally active. 

With regard to the characteristics and incentives of a target board of directors, I find that firm-specific knowledge and incentives of the board are strong predictors of the precision of fairness opinion valuations. Specifically, it is the firm-specific knowledge of the board that is crucial for the precision of valuations. In addition, I find that it is not only the knowledge of the board that is reflected in the precision of a fairness opinion, but also the board’s and CEO’s financial incentives to complete the deal. I also find that these financial incentives are strong determinants of the fairness of a fairness opinion.

 Another main finding of this study is that valuation properties in a fairness opinion matter to target shareholders. I find that target shareholders are more likely to initiate class action lawsuits specifically addressing fairness opinions if these are imprecise or unfair. This suggests that target shareholders use fairness opinions to decide on their tendering decisions, and that they consider valuation properties when assessing the usefulness of a fairness opinion. 

In addition, results reveal that the reputation and expertise of financial advisers also play an important role for the precision of valuations. I find that boutique advisers provide more precise fairness opinion valuations as compared to their counterparts. The recent popularity of boutique advisers seems to be warranted in terms of the precision of their valuation estimates. In general, I find that target advisers with prior ties with the acquirer provide less precise valuations, yet the opposite is true for boutique advisers. They tend to provide more precise valuations if they have prior ties with the acquirer potentially to increase their chances that the acquirer rehires them in the future. Another important finding of the study is that valuation properties are not only associated with shareholder class action lawsuits, but also with shareholders’ general assessment of fairness opinions’ usefulness. My findings reveal that less precise fairness opinions tend to delay the completion of the tender offer. This suggests that target shareholders need more time to decide whether to tender their shares if a fairness opinion contains less precise valuation estimates. Altogether, my study shows that target firms benefit from hiring boutique advisers since they provide more precise valuations in a fairness opinion, which in turn facilitates a timely deal completion.