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Valuation of Unlisted Direct Investment Equity
Author:
Thomas Elkjaer null

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Jannick Damgaard null

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Emmanuel O. Kumah
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Series:
IMF Working Papers
Volume/Issue:
Volume 2009: Issue 242
Language:
English
Publication Date:
01 Nov 2009
DOI:
https://doi.org/10.5089/9781451873894.001
ISBN:
9781451873894
ISSN:
1018-5941
Pages:
72
Keywords:
WP; accounting data; earnings before interest and taxes; risk premium; valuation model
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund