治理結構與公司價值——美國與東亞若干經(jīng)驗比較.ppt

1、Corporate Governance and the Value of Firms-Some Experiences of U.S and Asia,Professor K.C. John Wei, PhD Tel: (852)-2358-7676; Fax: (852)-2358-1749 E-mail: johnweiust.hk Department of Finance, HKUST and Visiting Department of Finance, Peking University Prepared for CCER, Peking University,Profile o

2、f Prof. K.C. John Wei,Prof. K.C. John Wei received his PhD in Finance at the University of Illinois, Champaign-Urbana, in 1984. He served the University of Mississippi as an Assistant Professor from January 1984 to June 1988. After serving the University of Miami as an Assistant Professor for one ye

3、ar, he moved to Indiana University, where he served as an Associated Professor from July 1989 to June 1992. Since July 1992, Prof. John Wei has been serving the HKUST Business School initially as an Associate Professor and later was promoted to full Professor. He served as Acting Head of the Departm

4、ent of Finance from January 2001 August 2002 and February June 2003. Prof. Wei has also been appointed the Director of the Centre for Asian Financial Markets since 1995. He was visiting University of Texas at Austin from September to December 2002 and is currently visiting Guanghau School of Managem

5、ent, Peking University. With research focuses on empirical research in capital markets, derivatives and asset pricing of Asian and U.S. markets, Prof. Wei has produced a number of high quality papers on these areas. Many of these papers were published in top journals in finance and have made conside

6、rable contributions to the finance literature. He is an author of four books (in Chinese) on Hong Kong stock and warrants markets and Taiwanese stock market. In addition, Prof. Wei is a regular column writer for the Hong Kong Economic Journal, a local newspaper specialised in financial news. On the

7、consultancy activities, Prof. Wei has helped Hang Seng Bank to develop a personal financial planning model called “SmartInvest,” and HSBC to develop a financial planning model, called “Rule-Based Investment Solutions.” He also conducted a consultancy project initiated by HKSAR for APEC and a few pro

8、jects for Hong Kong Stock Exchange. Prof. Wei have been involved executive teaching for HKUST, Peking University, Hong Kong Stock Exchange, Chinese provincial government officials, general corporate executives, Xiean Jassen, Daimler/Chrysler, China Mobile, Aspire, and BenQ.,Value creation and busine

9、ss strategies,Valuation Creation,Qijia,CEO,Xiushen,Zhiguo,Pingtianxia,Management team,Assets in place,Growth opportunity,Capital,People,Management skills Vision Integrity,Corporate governance Incentives,Restructuring Competitive advantages,M in the right industry) Low cost operator: Hon Hai Precisio

10、n, Taiwan Semiconductor, Dell, BYD (make money from good management) Low financing cost: GE Barrier to entry: (1) capital, (2) technology (patents), (3) distribution channels, (4) government protection Example: Profit margin = 20%; WACC = 15%; Capital turnover = 2 times For every $100 sales, profit

11、= $20, required capital investment = $50, cost of capital = $50*15% = $7.50, abnormal profit = $20 $7.5 = $12.5. At what level of profit margin, will the firm become a mature company?,Abnormal profit: Motorola, Ericsson and Nokia,Earnings quality,Are your company future incomes easy to forecast? Are

12、 they sensitive to business or industry cycle? (Microsoft vs Intel; GM vs Coca Cola) Economy-wide risk: Business cycle (GM vs Merck) Operating risk: Level of capital intensity (TSMC vs Yu Yuan) Financing risk: Leverage (NWD vs SHK Properties) Accounting information risk: Disclosure and corporate gov

13、ernance (CAS vs IAS; TSMC vs UMC) Inventory Accounts receivables Gross margin S but the cost can be high) Divestures Layoffs Developing a value-oriented approach to leading and managing their companies after restructuring Establishing priorities based on value creation Gearing planning, performance

14、measurement, and incentive compensation systems toward shareholder value Communicating with investors in terms of value creation,When are Companies in Need of Restructuring?,Score of 6-24 with 24 being the worst (based on Monitor) Total return to shareholders (TRS) Sales growth relative to industry

15、(growth) Operating margin relative to industry (operating efficiency) Capital return relative to industry (ROIC) Number of business units (focus?) Distance from median industry capital structure (WACC, optimal capital structure),Restructuring Process,Diagnostic Scan (Decision to restructure) Restruc

16、turing (Implementation plan) Value-based Management (VBM implemented) Incentive Design (New incentive system),Restructuring Framework,Current market value,Total potential value,DCF value using analyst forecasts,Value with internal and external improvements,DCF value using management expectation,Valu

17、e with internal improvements,Market Inefficiency Takeover speculation Internal improvements Corporate governance,Optimal opportunity,Public held business,Growth opportunities + Financial Engineering Capital structure Dividend policy Risk management,Disposal / new owners M&A Joint venture Spin-offs I

18、POs Letter stock Divesture,Operating improvements Revenue growth Cost reduction Capital efficiency,Perception Gap Overvalued Undervalued,Value created Through Restructuring,Restructuring Framework: Example,This company had 10 business units and its stock price was declining,Market Value $1,000,Maxim

19、um Value Potential $1,800,DCF value using analyst forecasts $1,050,Value with internal and external improvements $1,650,DCF value using management expectation $950,Value with internal improvement $1,200,Market Inefficiency $50,Value created $800,Growth opportunities + Financial Engineering $150 Not

20、enough debt,Internal improvements $450 Sold 3 losers,Internal improvements $250 Exit unprofitable product lines Reduce inventory,Perception Gap -$100 Overvalued,Value created Through Restructuring,Improve Operations: Internal Improvements,Challenge every part of the business system Procurement Raw m

21、aterials Manufacturing/Work-in-progress Finished goods (are they competitive?) Inventory Distribution channel and sales Accounts receivable,Rethink your portfolio of businesses: External Improvements,Focus on two dimensions to look for value improvement Value creation potential Competitive advantage

22、 Decision: High value creation + best in competitive advantage: should grow High value creation + weak in competitive advantage: should improve Low value creation businesses: should dispose,Ownership Alternatives: External Improvements,Spin-offs Avoid cross subsidization (IBM/PC) Eliminate managemen

23、t constraints (ATT&Lucent) Tax free Announcement effect is positive (may exceed value of entity to be spun off) Initial Public Offerings Allow direct investment in a subsidiary Tax free if IPO keeps cash (which may be used to repay corporate debt) Allow consolidation (tax and accounting) if less tha

24、n 20% of equity is sold Direct Sales Taxable (may provide tax shield),Financial Engineering,Minimizing Weighted Average Cost of Capital Does Not Maximize Value of Firm (Bankruptcy cost),Cost of equity,WACC,After-tax cost of debt,Minimum WACC,Maximize Value,Debt/Equity,Percent,Sources of Restructurin

25、g Value,In the U.S., the average breakdown of sources of value creation from restructuring indicates that approximately 60% comes from strategic and operating improvements,Put the Value Creation Plan into Action,Put Value into Planning Focus planning and business performance reviews around value cre

26、ation Develop Value-Oriented Targets and Performance Measures Focus on a measure that incorporate both growth and return on invested capital (ROIC) EP (Economic profit ) = Invested capital (ROIC Opportunity cost of capital) Tie Compensation to Value Assess Value of Strategic Investments Develop Inve

27、stor Communications Strategy Reshape the CFOs Role,Summary for Restructuring,Managing value consists of three broad steps: Taking stock of the value-creation situation within the company and identifying restructuring opportunities Acting on those opportunities (operational efficiency improvements, d

28、ivestures, acquisitions, reorganization) Instilling a value-creation philosophy A managing-value focus does not create value through financial manipulations. It creates value through developing sound strategic and operating plans Most companies would benefit from a through review of restructuring op

29、portunities Managers need to ensure that they identify and act on value-creation opportunities regularly,Approaches to Valuation,Discount Cash Flow (DCF) valuation Comparative measures or relative valuation Real Options Analysis (ROA) valuation,Discounted Cash Flow (DCF) Valuation,Estimating Free Ca

30、sh Flow,Measuring Value,F1,Firm,Cash flows,Invested Capital Fixed Assets Operating Working Capital,Year 1,Year 2,Year 3,Year 4,Year 5,Discounted Cash Flow Model,Value of operations = Discounted value of expected future free cash flow (FCF) Cash flows Timing Risk,Free Cash Flow - Definition,Free cash

31、 flows are: after-tax cash flow from operations remaining after all re-investment needs have been met. available for distribution to all providers of capital (both shareholders and bondholders).,DCF Valuation,0,1,2,T,Terminal ValueT=FCFT+1/(WACC-g) FCF1 FCF2 FCFT-1 FCFT,T-1,FCF = Free cash flow WACC

32、 = Weighted Average Cost of Capital TV = Terminal Value (at time T) = FCFT+1/(WACC g), where g is the long-term growth rate in sales T = Length of the forecast horizon (typically, 7 to 10 years),Sensitivity analysis,Examine sensitivity of valuations to different assumptions about: Sales growth (affe

33、cts FCF) Profit margins or operating efficiency or operating cost (affects FCF) Asset turnover ratios (I.e., capital expenditure or working capital investment) (affect FCF) Weighted average cost of capital,Fundamental Drivers of a Companys Value,Value Drivers,Basics of Value Creation,A firm creates

34、value only if it earns a return on its invested capital that is higher than the cost of financing the investment. That is, ROIC WACC Three value drivers: Growth Abnormal return (ROIC WACC) WACC (risk),Value Creation,Assets,Invested Capital $100 million,After-tax operating profit (NOPLAT) $18 million

35、,Return on Invested Capital 18%,Debt $50 million,Equity $50 million,Cost of Debt (after-tax) 6%,Cost of Equity 16%,Invested Capital $100 million,Weighted Average Cost of Capital 11%,The Return Spread,Return Spread = Return on Invested Capital (ROIC) Weighted Average Cost of Capital (WACC) When ROIC

36、WACC, the firm creates value. When ROIC = WACC, the firm neither creates value, nor destroys value. When ROIC WACC, the firm destroys value. Economic Profit or EVA = (ROIC WACC) Invested Capital,Value Metrics,EPS (Earnings per share) Profit Margin (Return on Sales) Book-to-Market (B/M) Price-Earning

37、s ratio (P/E) ROIC (Return on Invested Capital) Economic Profit or EVA (Economic Value Added) DCF (Discounted Cash Flow) CFROI (Cash Flow Return on Investment) TRS (Total Return to Shareholders) ,Value Driver Analysis,Economic Profit = (ROIC - WACC) Invested Capital Value drivers: Abnormal return: I

38、nvest only when ROIC WACC Growth: g Risk: WACC,ROIC Tree,ROIC,EBIT/Invested Capital,Cash Tax Rate,EBIT/Sales,Sales/Invested Capital,Operating Working Capital/Sales,Net PPE/Sales,Other Assets/Sales,COGS/Sales,Depreciation/Sales,SGA Expenses/Sales,ROIC = Profit margin x Asset Turnover,Value,Growth,ROI

39、C,WACC,Mergers and Acquisitions,Identifying Value Creation Possibilities,What makes two firms worth more together than apart? Synergy (relatedness, economies of scale and scope): Gillettes acquisition of -Duracell Economies of vertical integration (merger of companies at different stages of producti

40、on): Times acquisition of Warner Brothers Complementary resources (The target may have a unique product but lack the engineering and sales organization to produce and market it on a large scale.) Quicker and cheaper to merge with a firm that already has a lot of talent than to develop engineering an

41、d sales talent from scratch.,Evidence on Value Creation in M&A Transactions,The combined value of companies engaged in mergers and tender offers increases by about 7 percent around takeover announcements. How is the value shared? Targets get the bulk of it. Acquirers get roughly zero.,Reasons For Fa

42、ilures,Overoptimistic appraisal of market potential: skeptical about Rebound from a cyclical slump Turn around Rapid growth continues Overestimation of synergies Overlooking problems: due diligence Overbidding: escalation commitment Poor post-acquisition integration,Value Creation or Enhancement,Sum

43、mary,Value Enhancement: Summary,Increase cash flows from existing investments (NOPLAT) Poor invests: keep, divest, or liquidate Improve operating efficiency: operating margin Reduce the tax burden Reduce net capital expenditures on existing investments Reduce noncash working capital Increase expecte

44、d growth (g and ROIC) Tradeoff on reinvestment: reduce free cash flow but increase expected growth Not all growths are good: only ROIC WACC is good,Value Enhancement: Summary,Prolong the period of high growth (N) Brand name advantage Patents, licenses, and other legal protections Switching cost Cost

45、 advantage Reduce the cost of financing (WACC) Change operating risk Reduce operating leverage Change the financial mix Change financing type,Value Creation: Conclusion,Assets in place Restructuring (increase operating efficiency) Growth opportunity (g) New investments with ROIC WACC (value creation) R&D and new opportunity Merger and acquisition Prolong competitive advantage Reducing WACC Improve corporate governance Reach optimal capital structure Risk management to reduce risk Value, Value, and Value,Value Creation Chart,Assets in place,Val