In this paper we investigate the influence of corporate governance over operational efficiency of Russian companies. We measure efficiency with frontier efficiency methods (DEA and SFA). Corporate governance quality is introduced into the model using the original corporate governance index that is calculated based on methodology proposed in the paper. Using the sample of 54 largest Russian companies we test the model of frontier efficiency and demonstrate the high level of significance of corporate governance index.
In this paper the authors review the working papers presented in 2011 at international conferences and workshops on corporate governance in Europe. The focus was made on the trends on corporate governance development in emerging markets and its influence over corporate performance. Besides, authors analyze the theoretical approaches to corporate governance that provoked a lot of discussion in 2011.
The article deals with the investment skill of the Russian mutual funds’ managers. Studies of the American market performed in the second half of XX century produced mixed results, however those completed after 2000 uniformly confirm that investment skill exists only for periods of less than five years, if it exists in principle. The outperformance of the market happens more frequently in emerging markets. The authors find that most managers do not possess investment skill. 90% of the funds do not outperform the market consistently. Three of the four applied methodologies (Jensen’s Alfa, Sharpe ratio, Treynor ratio) revealed that in 2004–2009 there existed more successful funds during the booming market of 2004–2007, while during the downturn (2008–2009) the number of successful funds diminished significantly. The information ratio confirmed the opposite picture, i.e. more funds outperformed the benchmarking portfolio during the downturn. There are only about 5% of funds in the sample (3–4 out of 74) whose managers are able to outplay the market in the long run. The study revealed that the management company of a successful fund either is affiliated with a large state companie, a large banks, or has persons affiliated with stock exchanges among its shareholders. The affiliation with the stock exchanges is the key success factor in Russia. Meanwhile, the study showed that there is no correlation of a fund’s success with affiliation with Russian oligarchs. Participation of foreign professional management companies in a shareholder capital of Russian management companies does not guarantee success as well.
This paper reviews the theory of value-based management, classification of value-based management models and the main value-based management methods at the commercial bank. It is shown that value-based management models can be classified depending on: 1) used information; 2) measures of performance; 3) valuation horizon. First, we present key value drivers-based approach. In order to effectively manage shareholders’ value management should be based on key value drivers which are the main components of shareholder value and key performance indicators. In addition, we review an alternative approach based on intelligent management systems oriented to riskmanagement. The paper reviews the main international acts, regulating risk-management (FERMA Risk management standard, COSO Enterprise risk management-integrated framework, Basel II and Basel III). Fundamentally, value-based management methods are based on integration of traditional DuPont models and discounted сash flow-oriented approaches (DCF). We then analyze approaches to analysis of changes in welfare of company owners (Total Shareholder Return, TSR; Total Business Return, TBR). If TSR or TBR exceeds cost of equity, than during the reporting period there was an increase in bank value. In addition, we consider models of economic value added (EVA) and cash flow return on investment (CFROI). Proposed methods can be developed in interests of bank management tasks in the midterm
This article evaluates the peculiarities of current corporate ratings systems and addresses specific issues of the development of econometrical rating models for emerging market enterprises. Financial indicators, market-value appraisals, industrial as well as macroeconomic factors of different countries were used as explanatory variables. Ratings of the Standard & Poor's, Moody's Investors Service and Fitch Ratings agencies were considered and used for modelling. The predictive power of the econometrical models was examined. A comparison of the methodologies of the three leading agencies was discussed.
Mutual fund is one of the most popular investment route by investor, who allocate part of their funds to capital market. This paper surveys the field of measuring mutual fund’s managers’s skills. We focus on market-timing and selecting skills.
The paper presents the results of optimal capital structure range analysis which appears in case of significant recapitalization costs. The review of existing studies is complemented be the study conducted on a sample of large BRICS companies for 2002-2010 years. Results of the study demonstrate the presence of an optimal capital structure range for companies from emerging capital markets. The key determinants of the upper and lower boundaries of the range of optimal capital structure are return on equity, growth opportunities, assets structure and firm size. Managers of BRICS companies adjust capital structure asymmetrically, reaching different indicators of capital structure in cases of upper or lower boundaries breakthrough.
An article represents a comprehensive overview of approaches to capital structure modeling on the example of the public corporation Silvinit. At first, there are provided a short review of the company and of the corresponding industry followed by the description of how the analogues for the company were chosen. The next part of the article gives a step-by-step description of the practical implementation of such models as WACC model, EBIT-EPS, method of operational profit. Monte-Carlo approach is used for demonstrating an influence of the leverage increase on tax and interest payments as well as company's default risk. In conclusion the authors compare the results of different approaches with the current capital structure of Silvinit.
Emerging market companies typically have lover values than their counterparts in developed markets. In order to account for this practitioners typically use an ad hoc premium in discount rate in their DCF models – so called country risk premium. Approaches for this premium calculation do not have adequate theoretical basis in the literature. There is an alternative to premium which is in accounting for a country risk through scenario approach. However it is difficult to implement practically because of the calibration problem. Thus there is a problem of a country risk.
The concept of country risk premium has to be abandoned. We propose following procedure in emerging company DCF valuation.
1) Calculate theoretical discounted value as if the business is from developed country.
2) Account for the risk of an emerging market applying the discount. The discount can be obtained through analysis of differences between emerging and developed stock market multiples. As a result the problem of an emerging country risk stops being "black box" and becomes clear, observable and verifiable.
This paper proposes critical analysis of the theory and practice of discount rates. In addition paper gives a theoretical basis for country risk from the prospective of New Institutional Economics.