Consequences of the Arbitrage Dichotomy of Capital Allocation for the Construction of Opportunity Cost of Equity in Private Companies

Kód výsledku v 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>

Výsledek na webu

<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>

Jazyk výsledku

angličtina

Název v původním jazyce

Consequences of the Arbitrage Dichotomy of Capital Allocation for the Construction of Opportunity Cost of Equity in Private Companies

Popis výsledku v původním jazyce

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.

Název v anglickém jazyce

Consequences of the Arbitrage Dichotomy of Capital Allocation for the Construction of Opportunity Cost of Equity in Private Companies

Popis výsledku anglicky

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.

Druh

C - Kapitola v odborné knize

CEP obor

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OECD FORD obor

50206 - Finance

Projekt

—

Návaznosti

N - Vyzkumna aktivita podporovana z neverejnych zdroju

Rok uplatnění

2019

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Název knihy nebo sborníku

Global versus Local Perspectives on Finance and Accounting

ISBN

978-3-030-11851-8

Počet stran výsledku

7

Strana od-do

379-385

Počet stran knihy

397

Název nakladatele

Springer Nature Switzerland AG

Místo vydání

Bern

Kód UT WoS kapitoly

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