Valuation of Unlisted Direct Investment Equity

IMF Working Papers, November 1, 2009

Source details

Canonical URL

Valuation of Unlisted Direct Investment Equity

Other formats

• Markdown version
• Structured JSON version
• Bundle manifest

Bibliographic details

• Authors: Thomas Elkjaer, Jannick Damgaard, Emmanuel O. Kumah
• Published: November 1, 2009
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451873894.001

Overview

• Title: Valuation of Unlisted Direct Investment Equity
• Authors: Thomas Elkjaer, Jannick Damgaard, Emmanuel O. Kumah
• Publication date: November 1, 2009
• Series: Working Paper No. 2009/242
• Issue: 242
• Pages: 72

Purpose and scope

• Analyzes the seven valuation methods for unlisted direct investment equity included in the IMF Balance of Payments and International Investment Position Manual, Sixth Edition (BPM6).
• Empirical testing is based on publicly available Danish data.
• Tests three methods that are generally applicable across cases.

Key findings and results

• The choice of valuation method and estimation technique can have a highly significant impact on the international investment position.
• The price-to-book value method generates more robust market value estimates than the price-to-earnings method.
• The 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.

Methods examined

• Seven valuation methods are discussed in BPM6 (all seven identified in the Manual; three methods were empirically tested using Danish data).
• Empirical comparison focused on market-value estimation techniques, including:
  • Price-to-book value method (found to be more robust),
  • Price-to-earnings method (found to be less robust),
  • A third generally applicable method (tested but detailed empirical ranking not summarized on the page).

Policy implications and recommendations

• Results point to the need for further harmonization of valuation methods and estimation techniques used to compile the international investment position.
• The use of own funds at book value in the Coordinated Direct Investment Survey is likely to provide valuable data for valuing unlisted direct investment equity.

Subjects and keywords

• Subject: Estimation techniques, Foreign direct investment, Stock markets, Stocks, Wages
• Keywords: accounting data, earnings before interest and taxes, risk premium, valuation model, WP

Publication and identifiers

• DOI: https://doi.org/10.5089/9781451873894.001
• Stock No: WPIEA2009242
• ISBN: 9781451873894
• ISSN: 1018-5941

IMF Working Paper — Valuation of Unlisted Direct Investment Equity (Working Paper No. 2009/242)

Content in this bundle

• Annex 1: BPM6-Recommended Valuation Methods
  • Annex 1: BPM6-Recommended Valuation Methods (Markdown version)
  • Annex 1: BPM6-Recommended Valuation Methods (PDF)