The practice of investment valuation in emerging markets: Evidence from Argentina |
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Affiliation: | 1. Department of Medical Oncology, Institut Jules Bordet, Université Libre de Bruxelles, Brussels;2. Research Center of Epidemiology, Biostatistics and Clinical Research, School of Public Health, Université Libre de Bruxelles, Brussels, Belgium;3. Institute of Cancer Policy, Kings Partners Integrated Cancer Center, London, UK;4. Department of Medical Oncology, Hirslanden Clinic Aarau, Aarau, Switzerland;5. Research Center of Social Approaches of Health, School of Public Health, Université Libre de Bruxelles, Brussels, Belgium;1. School of Business Administration, 328.09 Prentis, Wayne State University, Detroit, MI 48202, USA;2. Penn State University – Lehigh Valley, Center Valley, PA 18034, USA |
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Abstract: | This paper discusses the challenges of applying traditional valuation techniques to emerging markets, and reports on how CFOs, financial advisors and private equity funds meet those challenges in Argentina, a major Latin American emerging economy. On many fronts, our findings show that there is substantial alignment with U.S. valuation practices. We find that: (a) discounted cashflow techniques like NPV, IRR and payback are very popular among corporations and financial advisors; (b) the CAPM is the most popular asset pricing model, yet it is frequently modified to account for country-specific risk; (c) capital budgeting analyses are performed in U.S. dollars by non-dollar companies; (d) financial advisors tend to apply U.S. betas to the emerging market, yet they rarely adjust betas for cross-border asymmetries; and (e) corporations tend to disregard the effects of small size and illiquidity. We provide tentative explanations for our findings. |
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