An emerging market perspective on key value drivers in the valuation of cross-border transactions into South Africa

This paper investigates the valuation performance of 16 individual value drivers, from five different value driver categories, in relation to the South African equity market for the period 2001-2010. The research results revealed, among other findings, that headline earnings is by far the most accur...

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Bibliographic Details
Published in:Economics, Management, and Financial Markets Management, and Financial Markets, 2014-12, Vol.9 (4), p.92-111
Main Authors: Nel, W.S, Bruwer, B.W, Le Roux, N.J
Format: Article
Language:English
Subjects:
Accounting policies
Accuracy
Analysis
Capital expenditures
Capital market
Cash flow statements
Discounted cash flow
Dividends
Earnings
Earnings per share
Economic analysis
Economic performance
Emerging markets
Equity
Financial analysis
Investments
Management science
Market prices
Opportunity costs
Private equity
South Africa
Valuation
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Summary:This paper investigates the valuation performance of 16 individual value drivers, from five different value driver categories, in relation to the South African equity market for the period 2001-2010. The research results revealed, among other findings, that headline earnings is by far the most accurate value driver and that, contrary to popular belief, earnings before interest, tax, depreciation and amortization and earnings before interest and tax are only fourth and fifth best alternatives. The evidence also suggests that, when employing multiples to perform equity valuations, a careful selection of value drivers could increase valuation accuracy by as much as 50.03%.
ISSN:1842-3191
1938-212X