Aaltodoc publication archive (Aalto University institutional repository)
School of Business | Department of Accounting | Accounting | 2013
Thesis number: 13492
Valuation of unlisted direct investment equity and the impact on Finnish international investment position
|Title:||Valuation of unlisted direct investment equity and the impact on Finnish international investment position|
|Year:||2013 Language: fin|
|Department:||Department of Accounting|
|Index terms:||laskentatoimi; accounting; yrityksen arvo; company valuation; tunnusluvut; financial ratios; arviointi; evaluation|
» hse_ethesis_13492.pdf size:2 MB (1892352)
|Key terms:||valuation, market value, multiple, direct investment, FDI, balance of payments, international investment position, macroeconomic statistical methodology|
This study examines the various means for valuing unlisted equity in the context of foreign direct investment (FDI) statistics. The objective is to contribute to the international efforts of improving market value estimates and the guidelines on how international direct investment activity should be measured. Moreover, this study explores the impacts that market approximation has on Finnish FDI figures and international investment position during 2005-2011.
This study is carried out by first analyzing how different valuation methods perform in an international context. Valuation models are tested with data taken from all listed companies of 27 European Union member states during 2005-2011. Finally, the models that are applicable in FDI valuation context and lead to lowest valuation errors are applied to the valuation of unlisted FDI in Finland.
The results suggest that when developing models for valuing unlisted direct investment equity, focus should be laid on price-to-book value methods. The results indicate as well that the current valuation practice, which is based on the book values of equity, generates lower direct investment positions when compared to market value approximations. Additionally, the results imply that Finland's overall external financial position might be strongly understated, when the valuation of unlisted direct investment equity is based on the book values.
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