The aim of this paper is to study the relationship between ownership structure and firm value. This relationship is analyzed taking into account not only the endogenous character of ownership but also the peculiarities of the Spanish corporate system. For this purpose, we select a balanced panel of 101 companies quoted in the Madrid exchange market from 1991 through 1997. We have applied econometric panel data techniques (generalized method of moments, gmm), which allows us to control the endogeneity problem through instruments. Our results confirm the positive effect of ownership concentration on firm market value. This relationship is robust to the inclusion of variables regarding the nature of the main shareholder, firm industry and time. Furthermore, we present some evidence about the relationship between the type of control (majority and minority) and a firm’s market value
This paper studies how sensitive real option valuations are to incorrect assumptions about the stochastic process followed by the state variables. We design a valuation model which combines Monte Carlo simulation and dynamic programming and provides an appropriate framework to evaluate the effect of estimation errors on both the value of real options and their critical frontier. Although the model is flexible enough to value American-type options contingent on a wide range of stochastic processes, we focus on the analysis of the effect of stochastic jumps. We apply our model to the valuation of an investment in the car parts industry documented in previous literature. Our results clearly show that underestimating this type of jumps might lead to substantial misjudgements in a firm’s decision-making processes. For instance, it may lead to profitable projects being rejected when jump diffusion is low, or negative expanded net present value projects being accepted
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