This executive summary provides an in depth analysis of corporate valuation, capital structures and agency issues in today’s management. It also provides guidelines as to the best practices regarding the same. The summary details the following aspects; corporate valuation, estimation of values for mergers, non financial companies trading decisions, corporate finance decision making, agency relationships between managers and shareholders, managers’ earnings manipulation and whether managers may be an off balance sheet liability.
The findings are as outlined; security analysts have a problem in valuing public and privately held information, some companies merely discount revenues and costs for mergers which could have cost $ 100M for a US chemical producer, bare speculation is poor for non financial companies such as P&G’s that led to $ 102M loss and it’s tough for mispriced securities and in bubble cases. Other findings are that with an information asymmetry stock price may fall when issuing equity, investor protection is costly and makes it difficult to manage a business though it’s essential and that manager may adjust operations and maintenance to report impressive earnings. Another is that managers may at times be off balance sheet liabilities by adding onto costs than benefits.
The conclusions are as follows; investor protection is essential, but it adds costs and may discourage human capital development. In case of a bubble, actions that are meant to take advantage usually lead to lawsuits when it finally bursts. Though managers may adjust operations and investments so as to have better earnings, shareholders are the ultimate burden bearers at the end.
Works Cited
Brealey, R. A., Myers, S. C., & Allen, F. (2008). APPLIED CORPORATE FINANCE. 8-205.
