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ACCT516 - Valuation in Emerging Economies

The course is designed to introduce students to the corporate governance and transparency issues faced by managers and investors in emerging economies, and the impact these problems have on firm valuation and capital market behavior. The goal of the class is to develop a framework for forecasting future earnings, cash flows and dividends and estimating firm values in these countries. The first half of the course will discuss the impact that weak legal, political and regulatory institutions have on financial reporting practices, corporate governance and capital market behavior, and develop an understanding of the incentives and institutional arrangements that exacerbate or mitigate these effects. The second half of the course will address the following question: how does an investor value an investment opportunity in an economy with weak institutions, such as poor corporate transparency, minimal protection of investor rights, a self-serving government and/or legal systems that fail to enforce contracts? The course will focus on understanding the risks, uncertainties and limitations investors face in each of these settings, and outlining the type of adjustments that should be made to firm valuations and underlying earnings, cash flow and dividend forecasts. Evidence from recent research on these topics will be presented and discussed throughout the course, with special emphasis placed on China. The capstone to the class will be a final project. The final project will focus on the analysis of a specific emerging economy's capital market and institutional environment, conducted in the context of determining the investment potential (as a minority shareholder) of a publicly-traded firm in that market. This course will be of value to those students who expect to make investment-related decisions in emerging or developing economies (such as China, India and Russia, among others). The course is designed to benefit both senior corporate managers and investment professionals. GERs: None

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