270.F基于现金流量的公司价值分析 外文原文.doc

Free Cash Flow, Enterprise Value, and Investor CautionHarlan PlattCollege of Business AdministrationNortheastern UniversitySebahattin DemirkanSchool of ManagementSUNY Binghamton UniversityMarjorie PlattCollege of Business AdministrationNortheastern UniversityAbstract：By analyzing actual cash flows in comparison with enterprise values (market capitalization plus debt minus cash) we document that the market dramaticall undervalues firms. The findings suggest that the equity market appears to have an extraordinarily high discount rate which negates future earnings in the calculus of firm value. That is, the discount rate is so high that the vast majority of future cash flows are virtually ignored.Our research finds that stock prices do not reflect future corporate earnings. This finding contrasts with the well known statement in finance textbooks that “the value of a firm equals the present discounted value of future cash flows.” In fact, we find that enterprise values are substantially less than the present discounted value of future cash flows. A one-dollar increase in future cash flows produces only a 75 cent increase in a firms enterprise value.The implication of our work is clear: companies are worth far more than the market believes. This provides strong support to the idea behind the private equity industry. We realize that of late private equity firms have overpaid for acquisitions and may lose their entire investment during the current phase of deleveraging. Yet, if private equity firms acquire companies at reasonable prices using less debt, they are likely to create substantial value as a consequence of the fact that companies are so undervalued by the market relative to their cash flows.There are no previous research efforts following our methodological design based on actual cash flows. Rather, .prior research studies have focused on the relationship between forecasted cash flows (by market analysts) and enterprise value. Our approach focuses on a different question the relationship between discounted future cash flows and the current market value as posited by financial theory.Keywords: Enterprise Value, Actual Cash Flow, Cash Flow, Valuation1.IntroductionThe common explanation provided in finance textbooks for the value of the firmis that it equals the present discounted value of future free cash flows (FCF). Fewanalysts or market observers disagree with this statement. Despite its universalacceptance, there are few studies of the basic FCF proposition and the theory thatunderlies the science of valuation. In this paper, we explore the question of whether the value of the firm is related to its future cash flows. Existent literature on this subject includes a few studies conceptually similar to ours and a large body of work on questions peripheral to the basic issue addressed in this paper. Those related works use the FCF valuation theory to address issues of market efficiency. Our work is directed at valuation and not the market efficiency question.Obviously actual future cash flows are unknown when analysts estimate value.Lacking actual future cash flow data, analysts create careful projections of annual cash flows for several years, usually less than 10, and then estimate cash flows in additional years with a terminal value. Public companies have value forecasts prepared for them by many unrelated individuals and organizations. Some forecasts are too optimistic while others are too pessimistic. Presumably optimistic forecasters are buyers of securities while pessimistic forecasters are sellers. A securitys market price would then be the share value that clears the market of optimists and pessimists.The specific projections of all individual forecasters are unavailable. What isknown, at a point in time, is the actual market capitalization and enterprise value (EV)that results from the interactions of these many forecasts. Some researchers have tested the relationship between the value of the firm and cash flow forecasts by obtaining a sample of analysts forecasts or forecasts from other published sources. We instead substitute actual cash flows for forecasted cash flows. Our null hypothesis assumes that the market-clearing forecast of future free cash flows is correct for every company. In that case, actual cash flows can be substituted for cash flow forecasts. If the market clearing forecast is too optimistic (pessimistic) then the observed EV exceeds (is less than) the present discounted value of actual free cash flows. Our first empirical test examines how closely EV compare with the present discounted value of actual subsequent cash flows. Finding the theory to be less than complete, our second empirical exercise considers additional explanatory factors to explain EV. This portion of the paper tests whether the accepted FCF theory fully explains EVs.2.LITERATURE REVIEWThe earliest written discussion of the idea that the value of something is related to its future cash flows comes from Johan de Witt (1671); though the basic idea traces back to the early Greeks See Daniel Rubinstein, Great Moments in Financial Economics, Journal of Investment Management (Winter 2003). In modern times, the idea that corporate value is related to future dividends was first described by John Williams (1938) See, Aswath Damodaran, “Valuation Approaches and Metrics: A Survey of the Theory,” Stern School of Business Working Paper, November 2006. Damodaran notes that Ben Graham saw the connection between value and dividends but not with a discounted valuation model. Durand (1957) observed what later became known as the Gordon growth model, that a dividend growing at a constant rate forever can be capitalized to estimate a firms value. The literature that tests the FCF theory examines a variety of valuation methods.All of these tests rely on forecasts of cash flows or earnings made contemporaneouslywith the valuation estimate. That is, starting in a given year, they compare actual EVagainst forecasts, made that year, for the same company. For example, Francis, Olsson, and Oswald (2000) compared three theoretical valuation models- discounted dividends (DD), discounted FCF, and discounted abnormal earnings (AE) Abnormal earnings as discussed by Ohlson (1995) assume that the value of equity equals the sum ofbook value plus abnormal earnings. by analyzing Value Line annual forecasts for the period 1989 1993 for a sample of 2,907 firm years that ranges between 554 and 607 firms per year. They found that the AE model had a 27% lower absolute prediction error than the FCF model and a 57% lower absolute prediction error than the DD model.Sougiannis and Yaekura (2001) also consider three multiperiod accounting basedvaluation methods: an earnings capitalization model (similar to FCF), residual income (a version of AE) without a terminal value, and residual income with a terminal value They also report that a 4% constant growth rate provides the best terminal value, even better than onesbased on individual firm growth forecasts. They put analysts earnings forecasts into the three theoretical models and find overallthat they provide greater insight than merely relying on current earnings, book values or dividends. Their sample covered 36,532 firm years over the period 1981 1998 of which 22,705 consisted of one year forecasts, 9,420 of two year forecasts, 1,279 of three year forecasts, and 3,128 of four year forecasts. They found that the AE model with a terminal value most accurately predicted current equity values in 48% of cases, the FCF model was most accurate in 18% of cases, and the AE without a terminal value was most accurate in 13% of cases. Current income and book values provided the best forecasts for the remaining 21% of the sample.Liu, Nissim and Thomas (LNT) (2002) in an article similar to Sougiannis andYaekura (2001) found that multiples based on analysts forward earnings projections(made in the same year) explain stock prices within 15% of their actual value whilehistorical earnings, cash flow measures, book value, and sales were not nearly asinsightful. LNT argue that multiples value future profits and risk better than present value forecasts. Their multiples are derived based on current earnings and stock prices.Gentry, Whitford, Sougiannis, and Aoki (2001) took a different theoretical andempirical approach comparing an accounting method which looked at the discountedvalue of future net income to a finance method that looked at the discounted value ofFCFs to equity. Their analysis tested the closeness with which each model predictedcapital gains. The sample included both US (1981 1998) and Japanese companies (1985 1998). Each year had between 881 and 1034 US companies and 166 to 365 Japanese companies. They found that the FCFs to equity method were not closely related to capital gains rates of return for either US or Japanese companies. In the US they found a strong relationship between cash flows associated with operations, interest, and financing (the accounting method) to capital gains; no similar relationship was found in Japan.Finally, Dontoh, Radhakrishnan, and Ronen (2007) compared the associationbetween stock prices and accounting figures. They found that the association betweenstock prices and accounting numbers has been declining over time. They suggest that this may be due to increased noise in stock prices resulting from higher trading volume driven by non-information based trading.A further related literature examines the relationship between valuation and changes in dividends . These studies are concerned with market efficiency. Dividends are a straightforward concept: they are the payments made to equity holders by a company. Dividends may also be thought to include all cash payouts to equity including share repurchases, share liquidations, and cash dividends. Several studies have examined whether changes in dividends relate to changes in equity values; among these are Shiller (1981), LeRoy and Porter (1981), and Campbell and Shiller (1987). These tests generally find that stock market volatility can not be explained by subsequent changes in dividends. Larrain and Yogo (2008) take a slightly different look at equity volatility. Using a more aggregate sample they find that the majority of the change in asset prices (88%) is explained by cash flow growth while the remaining 12% is explained by changes in asset returns. They conclude that stock prices are not explained by dividend changes.The residual income method is conceptually more similar to FCF than todividends. Residual income at its most basic equals the firms net income minus the cost of its capital. In the accounting literature, Ohlsons (1991, 1995) formulation of a residual income model (RIM) is widely accepted and has been subjected to numerous tests. RIM begins with an accounting identity; namely that the change in book value equals the difference between net income and dividends. Ohlson then defines AE as the difference between net income and lagged book value. It is then a small step to observe that the present discounted value of expected future abnormal earnings plus the book value of equity equals stock price See Jiang and Lee (2005), page 1466. Jiang and Lee (2005) test both the RIM and the dividend discount model. Their test of equity volatility finds that RIM provides more and better information than dividends.3.METHODOLOGYUnlike previous studies, we rely on actual subsequent cash flows over a period oftime rather than forecasts of cash flow made contemporaneously with EV. Previousresearchers can be thought of as studying the consistency between contemporaneous EV determined in the market and forecasts of future cash flows. Our study does not have that focus. We instead are interested in the actual accuracy of market determined EVs. We compare EVs at a point in time to subsequent cash flows. The closer these values are the more accurate is the market in valuing companies based on their future cash flows.In order to estimate corporate value with FCFs, annual costs of capital must beestimated for each company. An alternative is to determine value using the capital cash flow (CCF) method. CCF yields the same present value as FCF See Arzac (2005) or Platt (2008). but only requires a single cost of capital estimate for each firm. This is the approach we follow.CCF is determined following Arzac (2005) as follows:CCF = net income + depreciation - capital expenditures working capital + deferred taxes + net interest Estimated enterprise value (EEV) is calculated with the CCF estimates as follows: EEV =(CCFi,j ) /(1+ kj )t TVj /(1+ kj )y , (i=1.y) where k is cost of capital, TV is terminal value, i is year, y is the final year with cash flow data and j represents firm. Terminal value is estimated according to the Gordon growth model. EEV estimates are compared with EV, the firms actual value as of the last trading day of the year. EV is calculated following Arzac (2005) as follows;EV = MarketCap + Debt Cash The comparison between EV and EEV is a test of the accuracy of the markets valuation process. Cases where EV exceeds (is less than) EEV are ones of overly optimistic (pessimistic) market valuation.4.DataWe begin with all firms with fiscal year end for which there is data for: cash and short-term investments (data1), total assets (data6), current assets (data4), current liabilities (data5), short-term debt (data44), long-term debt (data9), notes payable (data206), and deferred taxes (data74), capital expenditures (data128) sales (data12), net income (data172) depreciation (data14) interest expense (data15) interest income (data62) common shares outstanding (data25), year-end stock price (data199).This results in an initial sample of 131,518 firm-year observations. All firms areclassified into their respective industries using historical SIC codes (data324).For each firm-year in the initial sample, we compute the following variables;EV = Market Cap (data199*data25) + Debt (data9 + data44 + data206)- Cash (data1)WC= Net current assets (data4 - data5) cash (data1) + notes (data206)D= Long term (data9) + short term (data44 + data206)E= Share price (data199) * Number of shares (data25)(where EV is enterprise value, WC is working capital, D is debt, and E is equity)In addition we also compute lagged values for WC and deferred taxes (data74).Next, we obtain betas for firm-years from Compustats Research Insight. Betas are winsorized at the 1st and 99th percentiles to account for extreme outliers in the data.Interest rates based on the 10-year constant maturity series (I10YR) are obtain from the Federal Reserve Banks website. After merging with the i