RESUMO DO TRABALHO

Código: 355

Área Temática: Mercados Financeiros de Crédito e de Capitais

Título: The Performance Of The P/b, P/e And Rivm Valuation Models For U.s. Rate-regulated Companies.

Resumo:
This paper studies the performance of the P/B, P/E and RIVM valuation models in finding out the intrinsic value of equity of U.S. utilities companies. Utilities are businesses whose revenues are set by regulators such as to allow only a “normal” rate of return and align market and book values. I expect that, if regulation is efficient in accomplishing this goal, the application of the sophisticated RIVM is not advantageous vis-à-vis the application of less complex multiples-based approaches because figures drawn from financial statements are very close to market values. U.S. manufacturing companies are used as a control group in order to maximize the comparability of the performance metrics. The performance of the valuation models is evaluated in terms of accuracy (how close to zero the valuation errors are) and bias (whether the model under or over estimates observed share price). The results show that for rate-regulated companies the RIVM generates value estimates that are neither more accurate (biggest absolute valuation errors) nor less biased (greatly over estimates the observed share price) than the ones obtained by the simple application of multiples-based approaches. This result suggests that residual income is quite low for rate-regulated companies in the United States. This can also indicate the regulation practiced in that country is relatively efficient and that the accruals measures recorded according to Regulatory Accounting Principles (RAP) perform well in terms of capturing the intrinsic value of utilities companies' shares.