Business Analysis and Valuation from the Perspective of Resources Deployment

• Main Authors: Che-Wei Li, 李哲瑋
• Other Authors: David M. Chen
• Format: Others
• Language: zh-TW
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/34649817978725744855

碩士 === 輔仁大學 === 金融研究所 === 94 === This thesis discusses business analysis and valuation from the perspective of resources deployment by decomposing ROE into CROE（ROE of Controlling Resource）, IROE（ROE of Influencing Resource）, FuROE（ROE of Future Resource）and FiROE（ROE of Financial Resource）. It investigates the correlation between each of the four ROE components and business value. The main purpose is to compare the explanatory power of the proposed ROE decomposition method against that of the traditional method such as the Du Pont Identity. Furthermore, this thesis conducts various sensitivity analyses by revising the measurements of components through the expensing of directors and employee bonus payments and the exclusion of non-recurring items. Empirical investigations on firm value creation are conducted on the bases of both short-term stock return and long-term Tobin’s Q. The results of regression analysis show that the proposed ROE decomposition method has a greater explanatory power with respect to both short- and long-term business value implications than the Du-Pont Identity. In addition, expensing directors and employee bonus payments and excluding non-recurring items can also increase the explanatory power of the model. Therefore, if business value is the major concern, proposed ROE decomposition method can be a step taken to enhance the valuation validity. The other results of regression analysis are as follows: The traditional decomposition method used is the Du-Pont identity (Model 1), which decomposes ROE into three ratios, sales margin, asset turnover and financial leverage. The results demonstrate that sales margin has a positive correlation with both short- and long-term business values. Asset turnover does not have a clear direction of association with short-term business value, but is positive related to long-term business value. Financial leverage does not have a clear direction of association with either short- or long-term business value. The results of proposed ROE decomposition method (Model 2) show that ROE of controlling resource is positively related to both short- and long-term business values. ROE of influencing resource is positive related to short-term business value, but does not have a clear direction of association with long-term value. ROE of future resource on the other hand, is positive related to long-term value but does not have a clear direction of association with short-term business value. Finally, ROE of financing resource does not have a clear direction of association with either short- or long-term business value.