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Redefining Shareholder Value by Milan Frankl, Schmid Mariana

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Chapter 1

Shareholder Value—A Review of Best Valuation Methods

Introduction to Valuation

In a potentially overvalued market (Damodaran 2010), in the current economic climate characterized by bubbles (Shiller 2014), and arguments in favor of and against the theory of efficient market hypothesis (EMH), we need to understand how we create and measure shareholder value and how shareholder value affects all the stakeholders of a company.

In 2014, three researchers won Noble prize in economics thanks to their work and complementarity on the EMH theory.

According to Damodaran, efficient markets should allow market prices to be unbiased estimates of the true value of the investment, meaning that any errors in the market price valuation should be equitable, ...

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