Consequences of the Arbitrage Dichotomy of Capital Allocation for the Construction of Opportunity Cost of Equity in Private Companies
The result's identifiers
Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F29142890%3A_____%2F19%3A00034106" target="_blank" >RIV/29142890:_____/19:00034106 - isvavai.cz</a>
Result on the web
<a href="https://www.springer.com/us/book/9783030118501" target="_blank" >https://www.springer.com/us/book/9783030118501</a>
DOI - Digital Object Identifier
<a href="http://dx.doi.org/10.1007/978-3-030-11851-8_36" target="_blank" >10.1007/978-3-030-11851-8_36</a>
Alternative languages
Result language
angličtina
Original language name
Consequences of the Arbitrage Dichotomy of Capital Allocation for the Construction of Opportunity Cost of Equity in Private Companies
Original language description
The research presented in this paper aims to empirically examine the link between the rate of return on capital demanded by owners of private companies where ownership and management is not separated and the opportunity costs of this capital redeemable on the capital market outside of the company's projects. Based on the empirical sur-vey carried out in the Czech Republic from 2016 to 2018 in the field of wholesale agricultural machinery companies, we first arrive at the existence of an arbitration di-chotomy between (i) the cost of capital at the level of these companies and (ii) the opportunity cost of capital from the owner's point of view by being the subject of valuation. We see reasons for the inefficiency of the capital market, when projects at the company level are not substitutable with allocations outside this company (alter-native investments will be either riskier or less profitable). As a result of this, there is a way of forming the equilibrium price of these assets, where the key role from the point of view of the owners is not a rational reflection on the amount of the present value of cash flows replicated from alternative, equally risky investment allocations, but rather the subjective behaviorally driven consideration of the owners about the need to sell their company.
Czech name
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Czech description
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Classification
Type
C - Chapter in a specialist book
CEP classification
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OECD FORD branch
50206 - Finance
Result continuities
Project
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Continuities
N - Vyzkumna aktivita podporovana z neverejnych zdroju
Others
Publication year
2019
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů
Data specific for result type
Book/collection name
Global versus Local Perspectives on Finance and Accounting
ISBN
978-3-030-11851-8
Number of pages of the result
7
Pages from-to
379-385
Number of pages of the book
397
Publisher name
Springer Nature Switzerland AG
Place of publication
Bern
UT code for WoS chapter
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