The Dark Side of Valuation: Valuing Young, Distressed, and Complex Businesses, Second Edition

Conclusion

As corporations and investors globalize, more and more of the companies that we value are in emerging markets. In valuing these companies, we face four issues: working with local currencies that are unstable and where risk-free rates can be difficult to estimate, an overlay of country risk, an absence of key information required for valuation, and poor corporate governance. In many emerging-market company valuations, we see either an unwillingness to confront these issues (ignoring accounting differences and corporate governance issues) or the adoption of simplistic rules (such as adding a country default spread to the cost of equity of every company in a market to reflect country risk).

This chapter developed a systematic framework ...