Valuation of Unlisted Direct Investment Equity

By Thomas Elkjaer, Jannick Damgaard, Emmanuel O. Kumah

November 1, 2009

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Thomas Elkjaer, Jannick Damgaard, and Emmanuel O. Kumah Valuation of Unlisted Direct Investment Equity, (USA: International Monetary Fund, 2009) accessed December 3, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper analyzes the seven valuation methods for unlisted direct investment equity included in the recently adopted IMF Balance of Payments and International Investment Position Manual, Sixth Edition (BPM6). Based on publicly available Danish data, we test the three methods that are generally applicable and find that the choice of valuation method and estimation technique can have a highly significant impact on the international investment position, pointing to the need for further harmonization. The results show that the price-to-book value method generates more robust market value estimates than the price-to-earnings method. This finding suggests that the valuation basis for the forthcoming Coordinated Direct Investment Survey - own funds at book value -will provide useful information for compiling the international investment position.

Subject: Estimation techniques, Foreign direct investment, Stock markets, Stocks, Wages

Keywords: Accounting data, Earnings before interest and taxes, Risk premium, Valuation model, WP

Publication Details

Pages:

72
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2009/242
Stock No:

WPIEA2009242
ISBN:

9781451873894
ISSN:

1018-5941

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