This article reviews the way in which the law in England and Wales considers the valuation of companies, and argues that the issues arising from this legal perspective are…
Abstract
This article reviews the way in which the law in England and Wales considers the valuation of companies, and argues that the issues arising from this legal perspective are indicative of a gap between the economic theory and practice of company valuation. Furthermore, an analysis of the relevant case law reveals several interesting practical difficulties which may suggest a role for theoretical analysis. Equally, a lack of awareness of the economic theory of valuation is revealed on the part of the courts. It is argued that this lack of awareness may have implications for the practices of valuation by professional accounting firms that are currently observed in the UK. An examination of the theory of company valuation shows that there is widespread agreement on the basic principle of the approach to be followed in valuing the shares in a company; in short, it is the present value of the company's future cash flows. Although there is debate over issues such as the appropriate model to be used in pricing risk, and how to allow for the impact of taxation in arriving at the discount rate, this principle appears to be universally accepted. Although some investigations have been carried out into the practical context of company valuation in the UK (Arnold and Moizer 1984, Moizer and Arnold 1984, Day 1986, and Keane 1992), no attention has been paid in the economics and accounting literature to the legal context. This is perhaps surprising given that the courts are sometimes important users of company valuation reports. This article reviews the way in which the law in England and Wales considers the valuation of companies, and argues that the issues arising from this legal perspective are indicative of a gap between the economic theory and practice of company valuation. Furthermore, an analysis of the relevant case law reveals several interesting practical difficulties which may suggest a role for theoretical analysis. Equally, a lack of awareness of the economic theory of valuation is revealed on the part of the courts. Historically, one of the features of the English commercial courts has been their refusal to become involved in matters of commercial judgement. English judges have held themselves to be sophisticated technicians in law but self‐professed amateurs in commercial matters. Their role has been to hear expert witnesses and to weigh up their professional advice. This contrasts with the position in continental courts; for example in France, the judges sitting at first instance in the lower commercial courts are businessmen and women rather than lawyers, with the result that their approach and findings are likely to be less legalistic and more commercial. This English legal approach needs to be seen in the context of an increasing concern with valuation attributable to the changes brought about by Sections 459 to 461 of the Companies Act 1985, together with the recent case law. Section 459 of the Act is concerned with minority unfair prejudice actions and under that section a member may petition the court for an order on the grounds that the petitioner's interests have been, are being or will be unfairly prejudiced by the conduct of the company's affairs. A considerable body of case law has built up on what constitutes unfairly prejudicial conduct. Under section 461 the court may make such order as it thinks fit for giving relief including the purchase of the shares of any member of the company by other members or by the company itself. Here the crucial question for the courts and for the parties negotiating a buy‐out in the shadow of the courts is the amount of the valuation and the factor to be taken into account in reaching that valuation. In such circumstances, it might be expected that there would be considerable concern with the basis of the valuation. However, ‘basis’ can have several different meanings; in the first place, it could be defined as asset basis, in the sense that a valuation may be concerned with the replacement, ‘going concern’ or realisable value of the firm's assets. Second, there is a need to define what economic model has been used to derive the ‘going concern’ or economic value; it may be helpful to describe this as the economic model basis of the valuation. Third, there is the question as to whether the proportion of the equity held affects the value; this might be termed the control basis. As we show below, the concern of the theoretical literature is primarily with the second category, whereas the case law tends to concern itself with the first and third categories. In order to clarify the theoretical and practical considerations involved, the first section of this paper briefly reviews the theory of equity valuation and the second contrasts this with the rather limited evidence on UK valuation practice. In the third section, the legal issues involved are explained and the way in which the courts proceed in cases which involve the valuation of shares are reviewed. Although the courts rely on expert evidence in making a valuation, certain principles and guidelines for valuation are laid down by the courts, and these are analysed and contrasted with the prescriptions on valuation found in the finance literature.
The notion that asset diversification reduces risk is ancient and can be traced as far back as the Talmud which states, “A man should always keep his wealth in three forms…
Abstract
The notion that asset diversification reduces risk is ancient and can be traced as far back as the Talmud which states, “A man should always keep his wealth in three forms: one-third in real estate, another in merchandise, and the remainder in liquid assets” (Baba Metzia, verse 42a). Somewhat more recently, in 1738, Daniel Bernoulli observed, “it is advisable to divide goods which are exposed to some small danger into several small portions rather than to risk them all together” (1738/1954, p. 30). Arguably, however, it was not until 1935 that the future Nobel laureate J. R. Hicks offered some early direction for modern portfolio theory. Although his research was more concerned with explaining the demand for money, he points out two important considerations for modeling risk. Hicks writes, “The risk factor comes into our problem in two ways: First, as affecting the expected period of investment, and second, as affecting the expected net yield of investment” (Hicks, 1935, p. 7). Regarding Hicks' first point, both Markowitz (1952) and Roy (1952) emplace their analyses in a one-period investment horizon. Second, and even more relevant to modern portfolio theory, is Hicks' suggestion of using an expected value calculated with subjective probabilities. Hicks continues, “It is convenient to represent these probabilities to oneself, in statistical fashion, by a mean value, and some measure of dispersion” (1935, p. 8). Clearly, Hicks comes very close to articulating a mean–variance solution. Crucially, and unlike Roy or Markowitz, Hicks does not develop this line of reasoning nor does he suggest the particular use of variance or standard deviation as that measure of risk. Nonetheless, Hicks' suggestion anticipates the work of Markowitz and Roy.1
Digital texts are increasingly widespread and research is needed on how students use digital texts, particularly in school-based classwork. The purpose of this study is to…
Abstract
Purpose
Digital texts are increasingly widespread and research is needed on how students use digital texts, particularly in school-based classwork. The purpose of this study is to challenges persistent myths about young people’s affinity with digital tools by investigating the factors that condition or limit the ways students interact with and respond to digital web-based texts.
Design/methodology/approach
Two 12th grade English classes, 21 students in all, produced written responses to a digital text. Following a preliminary analysis of student writing, 7 students, representing diverse reading backgrounds, were interviewed. Content units were used as a unit of analysis for both interviews and written data. Following open coding, 14 initial codes were condensed into 3 categories, namely, routines, tools and beliefs.
Findings
This study suggests that for students to see digital textual resources as significant, they must be guided to engage with these features. Classroom routines, the tools used in teaching and learning reading and the beliefs students hold about their school-based reading can restrict student uptake of digital features of texts. Instruction must be adapted to include teaching on digital texts.
Originality/value
Students interact with digital texts daily, yet explicit teaching on reading digital texts presents particular demands. This study contributes to understanding the challenges faced by students and teachers when they grapple with texts in different forms.
Details
Keywords
Purpose – This chapter examines the problem of belonging for Muslims in the United States in a political environment where Muslims are increasingly represented as a threatening…
Abstract
Purpose – This chapter examines the problem of belonging for Muslims in the United States in a political environment where Muslims are increasingly represented as a threatening ‘other’ by conservative politicians and right-wing media. The goal is to demonstrate how an emotionally charged event, the murder of three middle class Muslim students in Chapel Hill, North Carolina, in 2015, was taken up by the media in ways that reflected sharply contested political agendas and constituted divergent stories and biographies of belonging and stigmatization for the victims, their families and the broader Muslim community.
Approach – The research draws on a wide range of media representations of the murder, including local, national and international news sources and social networking sites. The analysis is based on close readings of this range of stories.
Social Implications – The analysis demonstrates that this murder drew widespread attention in the Muslim community because these particular victims readily became representative of a Muslim ‘model minority’. Despite the ambivalence associated with belonging on such terms, the families and Muslim community used the stories of these murder victims to speak out against negative stereotypes and to remind the American public of the dangers of inflammatory rhetoric.
Originality – The chapter takes an original approach to the problem of belonging by tracing in detail how a single event can generate divergent stories that mark their narrators as belonging in ways that are contested by others, vividly demonstrating the process of différance articulated by Derrida.
Details
Keywords
Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18;…
Abstract
Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18; Property Management Volumes 8‐18; Structural Survey Volumes 8‐18.
Index by subjects, compiled by K.G.B. Bakewell covering the following journals: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18; Property Management…
Abstract
Index by subjects, compiled by K.G.B. Bakewell covering the following journals: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18; Property Management Volumes 8‐18; Structural Survey Volumes 8‐18.
Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18;…
Abstract
Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18; Property Management Volumes 8‐18; Structural Survey Volumes 8‐18.
Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18;…
Abstract
Compiled by K.G.B. Bakewell covering the following journals published by MCB University Press: Facilities Volumes 8‐18; Journal of Property Investment & Finance Volumes 8‐18; Property Management Volumes 8‐18; Structural Survey Volumes 8‐18.
The need for IT (Information Technology) and information skills training has been revisited by a new approach to clinical decision‐making in the National Health Service (NHS)…
Abstract
The need for IT (Information Technology) and information skills training has been revisited by a new approach to clinical decision‐making in the National Health Service (NHS): evidence based practice. The Trent Institute for Health Services Research supports NHS staff in the Trent region either wishing to implement evidence based practice or to undertake research of their own by providing advice and training. A range of courses providing training in research skills has been developed. Included in this range are four half‐day information skills courses, developed by the Information Resources section of the Trent Institute: Literature Searching, Health information on the Internet, Introducing the Cochrane Library and Sources for clinical effectiveness. Aims and objectives for each course have been developed to facilitate the development of course materials and the evaluation of training. Evaluation questionnaires are completed by course participants and at the time of writing (November 1997), response has been positive. The information collected is being used to plan future courses for the next academic year, such as Training the Trainers courses.