Corporate Financial Strategy

Bender, Ruth; Ward, Keith

doi:10.4324/9780080942841

Cited by 25 publications

(22 citation statements)

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“…DCF is calculated by discounting a project's future free cash flow (FCF) at its cost of capital over its forecasting period [16,17]. Even though DCF is one of the most widely used valuation methods, it has some drawbacks, which RO analysis tries to solve.…”

Section: Literature Reviewmentioning

confidence: 99%

The Application of Discounted Cash Flow and Real Option Analysis Methods for Coal Mining Projects with Abandonment and Expansion Options: A Case Study of Pt X in East Kalimantan, Indonesia

Sutrisno¹,

Anas²

2019

Proceedings of the 3rd Asia-Pacific Research in Social Sciences and Humanities Universitas Indonesia Conference (APRISH 2018)

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Recent rising coal prices starting in the second half of 2016 has motivated both existing coal companies and new players to dig deeper to expand their production capacities and to explore new sites. This exposes them to higher risks. A tool that not only quantifies business opportunities but also takes into account uncertainty in coal projects becomes crucial. The traditional valuation method of discounted cash flow (DCF) analysis has been used for very long time but it is not sufficient for mining because it does not capture the high uncertainty and operational flexibility in the industry. An alternative valuation method, real option (RO) analysis can complement the limitations of DCF. Most studies related to RO Analysis application in mining project have focused on coal price and mining cost volatilities, but none has examined the impact of foreign exchange rate volatility, especially the exchange rate between the US dollar (USD) and the Indonesian Rupiah (IDR) to the project value. This study aims to enrich the literature on RO analysis application using an Indonesian coal company as a case study. It shows that RO analysis improves decision making by taking into account uncertainty and management flexibility. Furthermore, this study examines how different volatilities impact project value. Besides price and cost volatilities studied previously, this study examines one additional parameter, the USD IDR exchange rate volatility, as well as how different option maturities affect project value. A case study analysis using quantitative method of project evaluation or capital budgeting is applied. Data are analyzed using descriptive and linear regression to form input parameters. First, DCF is applied; then, in order to capture uncertainty and management flexibility, RO Analysis is applied to complement the DCF method. This study confirms that RO Analysis improves decision making by accounting for uncertainty and management flexibility in the calculation. Volatility and option maturity are key parameters impacting the project value. The higher the volatility is, the higher the project value is. The longer the option life is, the higher the project value is.

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Section: Literature Reviewmentioning

confidence: 99%

The Application of Discounted Cash Flow and Real Option Analysis Methods for Coal Mining Projects with Abandonment and Expansion Options: A Case Study of Pt X in East Kalimantan, Indonesia

Sutrisno¹,

Anas²

2019

Proceedings of the 3rd Asia-Pacific Research in Social Sciences and Humanities Universitas Indonesia Conference (APRISH 2018)

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“…Pursuant to Article 1 paragraph (13) of Law of the Republic of Indonesia Number 8 of 1995 concerning the Capital Market, the capital market is defined as activities related to public offerings and securities trading, securities issuing of public companies, institutions and professions related to securities. Efficiency in the capital market occurs when stock prices reflect all available information [6].…”

Section: A Capital Marketmentioning

confidence: 99%

Market Reaction to Announcement of the Corporate Governance “Comply or Explain” Regulation and Determinants of Compliance Level

Anintyarini¹,

Utama²

2019

Proceedings of the 12th International Conference on Business and Management Research (ICBMR 2018)

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The purpose of this study is to investigate the market reaction in Indonesia to the announcement of the Financial Services Authority Regulation (POJK) on the implementation of corporate governance guidelines using a "comply or explain" approach. In addition, the study examines the effects of trends in industry (financial industry or other industries) and the degree of ownership concentration on compliance with the POJK, as intended, in the annual reports of companies. An event study test reveals that the POJK's announcement has not been responded to by the market. The public had been aware of the regulation in the context of corporate governance for certain particular industries, in addition to other specific regulations, prior to it being issued by the Financial Services Authority (OJK). Furthermore, the results of the analysis revealed a higher trend for compliance with the POJK for the financial industry. This is indicative of more accountable and transparent management within the financial industry. In relation to ownership concentration, firms with high ownership concentrations have tended not to contravene the POJK with respect to the inclusion in their annual reports of the implementation of corporate governance guidance, since these regulations are mandatory for all public firms.

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“…Liquidity is a precondition to make sure that firms are able to meet its short-term obligations and its continued flow can be guaranteed from a profitable venture. Some businesses choose to have enough cash funds available to meet their daily needs, some firms have overdraft or borrowing facilities, and others use a form of asset finance (Bender 2009). In most of the cases it's been seen that there is always a negative relationship between liquidity and profitability, Sound profitability increases the profit of the firm where liquidity helps maintaining the operation of the firm (Ankita 2013).…”

Section: Working Capital Management and Corporate Financial Performancementioning

confidence: 99%

Effect of Corporate Governance on Working Capital Management and Financial Performance

Megeid

Sobhy²

2015

الفکر المحاسبى

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This research investigates the impact of corporate governance monitoring practices on the efficiency of working capital management and on improving the corporate financial performance. This research is based on a sample of 57 listed manufacturing firms in the Egyptian Stock Exchange for the period 2006-2010. Results were analyzed by using the multiple regression and Pearson correlation techniques. The result indicates that working capital management efficiency is critical for maintaining balance between liquidity and profitability. Findings show that return on assets and current ratio is negatively correlated with the Cash Conversion Cycle (CCC). This means that by shortening CCC, firms' profitability and liquidity improves. The results implies that firms can create value for their shareholders by keeping the CCC to minimum and through effective working capital management managers can promotes increase in firm profitability and liquidity. In addition, the results revealed that there is a significant impact of corporate governance practices on the efficiency of working capital management.

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Corporate Financial Strategy

Cited by 25 publications

References 0 publications

The Application of Discounted Cash Flow and Real Option Analysis Methods for Coal Mining Projects with Abandonment and Expansion Options: A Case Study of Pt X in East Kalimantan, Indonesia

The Application of Discounted Cash Flow and Real Option Analysis Methods for Coal Mining Projects with Abandonment and Expansion Options: A Case Study of Pt X in East Kalimantan, Indonesia

Market Reaction to Announcement of the Corporate Governance “Comply or Explain” Regulation and Determinants of Compliance Level

Effect of Corporate Governance on Working Capital Management and Financial Performance

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