ABSTRACT In 2010, the world’s focus on the global financial crisis shiftedfrom financial markets ... more ABSTRACT In 2010, the world’s focus on the global financial crisis shiftedfrom financial markets and institutions to sovereign debt, especially inEurope. This has motivated a re-examination of techniques andtraditional indicators to assess the health of individual countries.Since the potential financial and economic implosion of several Europeancountries seemed to erupt fairly quickly, one might conclude that theexisting scholarly and practitioner methods were not adequate. Webelieve that one can learn a great deal about sovereign risk by, inaddition to observing traditional macroeconomic measures of performance,to also carefully assess the health and aggregate default risk of anation’s private corporate sector - - a type of“bottom-up” analysis. Models such as Altman’s originalZ-Score technique and more recently, the Z-Metrics’ risk system,can provide important early warning measures of sovereign vulnerability.This study does just that by analyzing the Z-Metrics’ medianprobability of default (PD) of nine European countries and the USA fromtwo time periods prior to the clear recognition of serious financialdifficulties in the Eurosector. Our measures of PDs are also compared tothe implied probability of default from a prominent market indicator,the credit default swap market, with both general confirmation and somesurprising results.
This paper focuses upon differences in the valuation of UK quoted and unquoted companies. It draw... more This paper focuses upon differences in the valuation of UK quoted and unquoted companies. It draws on empirical evidence over the period from 1991 to 1997. It commences with an overview of the published literature. This suggests a broad spectrum of valuation statistics ranging from very minor discounts for non-listed companies relative to their quoted brethren, up to a discount as high as 40%. The empirical analysis uses PE ratios, derived from the publication Acquisitions Monthly, in respect of non-listed, private companies selling out in takeover deals. These are compared with average PE ratios for quoted companies in Britain. A raw statistic of approximately 40% was found as the discount for non-listed firms relative to quoted companies. However, this is dramatically different when corrected for size. For size varying from less than GBP 0.5 million to about GBP 55 million, the discount ranges, respectively, from 16% to 6% with an average of around 10%. Regression equations relating size and PE ratio are presented.
ABSTRACT In 2010, the world’s focus on the global financial crisis shiftedfrom financial markets ... more ABSTRACT In 2010, the world’s focus on the global financial crisis shiftedfrom financial markets and institutions to sovereign debt, especially inEurope. This has motivated a re-examination of techniques andtraditional indicators to assess the health of individual countries.Since the potential financial and economic implosion of several Europeancountries seemed to erupt fairly quickly, one might conclude that theexisting scholarly and practitioner methods were not adequate. Webelieve that one can learn a great deal about sovereign risk by, inaddition to observing traditional macroeconomic measures of performance,to also carefully assess the health and aggregate default risk of anation’s private corporate sector - - a type of“bottom-up” analysis. Models such as Altman’s originalZ-Score technique and more recently, the Z-Metrics’ risk system,can provide important early warning measures of sovereign vulnerability.This study does just that by analyzing the Z-Metrics’ medianprobability of default (PD) of nine European countries and the USA fromtwo time periods prior to the clear recognition of serious financialdifficulties in the Eurosector. Our measures of PDs are also compared tothe implied probability of default from a prominent market indicator,the credit default swap market, with both general confirmation and somesurprising results.
This paper focuses upon differences in the valuation of UK quoted and unquoted companies. It draw... more This paper focuses upon differences in the valuation of UK quoted and unquoted companies. It draws on empirical evidence over the period from 1991 to 1997. It commences with an overview of the published literature. This suggests a broad spectrum of valuation statistics ranging from very minor discounts for non-listed companies relative to their quoted brethren, up to a discount as high as 40%. The empirical analysis uses PE ratios, derived from the publication Acquisitions Monthly, in respect of non-listed, private companies selling out in takeover deals. These are compared with average PE ratios for quoted companies in Britain. A raw statistic of approximately 40% was found as the discount for non-listed firms relative to quoted companies. However, this is dramatically different when corrected for size. For size varying from less than GBP 0.5 million to about GBP 55 million, the discount ranges, respectively, from 16% to 6% with an average of around 10%. Regression equations relating size and PE ratio are presented.
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