Band 3, Heft 1

This study investigates the impact of privatization on value creation in State Owned Enterprises (SOEs) in the Middle East and North Africa (MENA) region. A multi-case study approach, using quantitative and qualitative data, is used to rectify the findings of prior SOE privatization research by taking a finer-grained analysis into the conditions that determine post-privatization performance. This study addresses the research question, "What is the effect of privatization in terms of value creation for State Owned Enterprises in the Middle East and North Africa (MENA) region?" Value creation is measured in terms of profitability, operating efficiency, capital expenditures, and leverage. Using quantitative performance metrics to assess value creation, we also use qualitative data to show that post-privatization value creation depends on specific strategic initiatives as well as government policy toward competition. Our overall conclusion is that privatizing SOEs can be beneficial in the MENA region but must coincide with strong government reform policies, and certain financial and managerial strategies.

State statutory law concerning recoverable damages for wrongful death is comprehensively surveyed and categorized, as in Schap and Valvo (1997). Various kinds of awards, limitations, and procedures are presented in tabular form. Suitable coding within the table highlights statutory changes since the previous published survey. The table should both facilitate comparative institutional analysis by researchers and provide an informational base for practitioners.

This paper examines a random sample of 100 acquisitions of U.S. target firms acquired between the first quarter of 1999 through the first quarter of 2003 comparing the ``Control Premium" reported by Mergerstat/Shannon Pratt's Control Premium StudyTM to a comparable ``Abnormal Return" calculated using established academic ``event study" methodology. One of the differences between the Mergerstat methodology and the event study methodology is the removal of general market movements from the total stock return to arrive at the abnormal return while no such adjustments are made to the Mergerstat control premium.The ``Control Premium" reported by Mergerstat averaged 49.02% compared to 53.64% calculated using the event study methodology, a difference of -4.62%. During the event periods, the S&P 500 Index experienced a -4.45% average change, accounting for 96% of the difference in average result between the two methods. However, when the sample is split between up and down market periods, anomalies appear.An analysis of the up market periods reveals an average event study abnormal return of 59.97% compared to a 34.95% average Mergerstat Control Premium. This 25% difference is explained by Mergerstat's methodology understating the ``run-up" of target firms' stock prices prior to the acquisition announcement.

Risk, in a financial sense, is defined as variance about some forecasted value. Any time a business appraiser forecasts future cash flows of any sort, these future value estimates are actually means of all likely cash flows in that particular year. The same holds true with discount rate estimates. Several software products allow an analyst to simulate variable future cash flows and/or discount rates but they all require the forecasting of a mean figure, its standard deviation or variance, the shape of its distribution and the correlation coefficients between all variables involved. Usually, accurately estimating most of these data are impossible in a business valuation context. This article presents a simplified method of developing an actual risk measure (standard deviation) that may be used with discounted cash flow valuation models.

This paper develops a labor-based model where a worker chooses between not only work and leisure, as the traditional labor models have argued, but rather between labor, leisure and the purchase of insurance. The model allows the insurance buyer to determine the amount of insurance he is willing to work for and purchase while maximizing utility and deriving the shadow price of risk, thus, the value of life. The model is applied to quadratic, logarithmic, and exponential utility functions. Results can help insurance companies determine the cost of insurance associated with a specific job and related risk.

Most sale proceeds from accounting practice transfers are allocable to goodwill despite the fact that neither sellers nor buyers generate significant profit from ordinary operations. Widely held valuation models hold that goodwill value is driven exclusively by profit and that accounting practice investors ought to demand returns higher than those realized by publicly traded equity investors. The existence of transferable goodwill without operating profit thus seems anomalous. This paper demonstrates that risk reducing sales terms explain these anomalies. As these sales terms are not necessarily unique to accounting practice transfers, the implications for valuation theory are quite significant.

Valuations of small private business for selling purposes are carried out within a negotiation process. One key point in this negotiation is to understand the economic value involved in the operation, since the right price is a key factor for reaching a good transaction. Contrary to the conclusions established in the commented article, I believe that valuation theory, when properly understood and used correctly, is a superb tool to identify where the economic value comes from and how said economic value can/should be shared.

Owner employees require reasonable compensation for services provided to their companies. It is a major conceptual error to treat such compensation as free cash flow in the calculation of economic value.

Currently, only a small fraction of post-employment covenants result in court intervention. However, the literature suggests an increasing propensity of employers to require these agreements. The predicted result is a high frequency of breaches and consequent requirements to value alleged business losses. This paper explores some of the practical implications of this scenario.

The need to value complex options containing reload features is becoming increasingly more common as such options become more proliferate. Traditionally, two types of valuation methods have been used: the intrinsic method and closed-form models, such as Black-Scholes. These methodologies undervalue options with reload features, a fact recently recognized by both accounting regulators and some courts which have sanctioned the use of binomial/lattice methodology. Such undervaluation can be costly to clients in litigation such as divorce cases. This study analyzes these alternative methodologies and reveals the extent of such undervaluation when the Black-Scholes method is used. It also provides evidence of the sensitivity of the resulting value to various assumptions required by binomial/lattice models.

This research documents the time series behavior of unemployment rates for Hispanics and whites over the period of 1976-2008. In particular, we provide insight as to how Hispanics fared relative to whites by examining the unemployment rate, the unemployment rate gap, and the cyclical component of unemployment. The results should prove useful to those involved in applied economic analysis.