Projection bias in tender offer valuation reports
DOI:
https://doi.org/10.17524/repec.v19.e3811Keywords:
Company Valuation, Projection Bias, Discounted Cash Flow, Performance, Public OfferingAbstract
Objective: To examine whether, in tender offer valuation reports that apply the Discounted Cash Flow (DCF) method, five variables related to the issuance context contribute to explaining the overvaluation or undervaluation of projected economic–financial performance relative to the performance actually achieved.
Method: Multiple linear regression models were used for the main analysis. Additionally, decision tree and ridge regression models were estimated, although their results did not exceed those presented in this study. A binary model, also estimated as a supplementary procedure, confirmed the findings reported here. Confirmatory results were likewise obtained for the fee model using correspondence analysis.
Results: The findings demonstrate that the short-term difference between projected and actual performance is significant, indicating the presence of projection bias. This bias is explained by the tender offer modality and the industry of the firm being valued. The amount paid to the appraiser as fees was not significant in explaining this bias.
Contributions: Research on business valuation remains scarce in emerging countries. From a practical standpoint, evidence comparing projected and actual values contributes to users’ perceptions of valuation reports and to improving the performance and quality of the valuation process.
Translation
References
Bonaventura, M., & Giudici, G. (2016). IPO valuation and profitability expectations: evidence from the Italian exchange. Eurasian Business Review, 7, 247-266. https://doi.org/10.1007/s40821-016-0049-1.
Bozos, K., & Nikolopoulos, K. (2011). Forecasting the value effect of seasoned equity offering announcements. European Journal of Operational Research, 214(2), 418-427. https://doi.org/10.1016/j.ejor.2011.04.007
Cogliati, G. M., Paleari, S. & Vismara, S. (2011). IPO pricing: growth rates implied in offer prices. Annals of Finance, 7(1), 53-82. 10.2139/ssrn.965450
Comissão de Valores Mobiliários [CVM]. (2002). Instrução CVM nº 361, de 5 de março de 2002. Dispõe sobre o procedimento aplicável às ofertas públicas de aquisição de ações. Recuperado em 03 março de 2022, em http://www.cvm.gov.br/legislacao/inst/inst361.html.
Comissão de Valores Mobiliários [CVM]. (2012). Instrução CVM nº 527, de 04 de outubro de 2012. Dispõe sobre a divulgação voluntária de informações de natureza não contábil denominadas LAJIDA e LAJIR. Recuperado em 03 março de 2022, em http://www.cvm.gov.br/legislacao/instrucoes/inst527.html.
Damodaran, A. (2004). Finanças corporativas: teoria e prática. 2. ed. Bookman.
Dechow, P. M., Hutton, A. P. & Sloan, R. G. (2000). The relation between analysts' forecasts of long‐term earnings growth and stock price performance following equity offerings. Contemporary Accounting Research, 17(1), 1-32. 10.1111/j.1911-3846.2000.tb00908.x
Firth, M., & Smith, A. (1992). The Accuracy of Profits Forecasts in Initial Public Offering Prospectuses. Accounting and Business Research, 22(87), 239-247. https://doi.org/10.1080/00014788.1992.9729441.
Gujarati, D. N. & Porter, D. C. (2011). Econometria básica. 5 ed. Porto Alegre.
Kothari, S. P. (2001). Capital Markets Research in Accounting. Journal of Accounting and Economics, 31(1-3), 105-231. 10.1016/S0165-4101(01)00030-1
Martinez, A. L. (2004). Analisando os analistas: estudo empírico das projeções de lucros e das recomendações dos analistas de mercado de capitais para as empresas brasileiras de capital aberto. 250 f. Tese (Doutorado em Administração de Empresas) – Escola de Administração de Empresas de São Paulo da Fundação Getúlio Vargas.
Mumtaz, M. Z., Smith, Z. A. & Ahmed, A. M. (2016). An empirical analysis of the implicit growth rate for industrial IPOs listed in Pakistan. Pakistan Development Review, 55(1), 15-28. Recuperado em 03 março de 2022, em http://www.jstor.org/stable/43831308.
Noda, R. F. (2018). Laudos de avaliação: metodologias utilizadas, erros e vieses. 214 f. Tese (Doutorado em Administração) – Departamento de Administração, Universidade de São Paulo.
Oliveira, J. F. R., Viana Jr., D. B. C., Ponte, V. M. R. & Domingos, S. R. M. (2017). Indicadores de desempenho e valor de mercado: uma análise nas empresas listadas na BM &FBovespa. Revista Ambiente Contábil, 9(2), 240-258. 10.21680/2176-9036.2017v9n2ID10787
Palepu, K. G. & Healy, P. M. (2008). Business analysis and valuation: using financial statements. 4th ed. Mason, Ohio: Thomson South-Western.
Pereiro, L. E. (2002). Valuation of companies in emerging markets: a practical approach. New York: John Wiley & Sons.
Porter, M. E. (1981). The contributions of industrial organization to strategic management. Academy of management review, 6(4), 609-620. 10.2307/257639
Saito, R., Villalobos, S. J. S. & Benetti, C. (2008). Qualidade das projeções dos analistas sell-side evidência empírica do mercado brasileiro. Revista de Administração-RAUSP, 43(4), 356-369.
Santos, J. S. G., Pereira, C. C. & Lustosa, P. R. B. (2013). Impacto da projeção dos analistas de mercado nos resultados das IPO's brasileiras no período de 2004 a 2009. Revista Ambiente Contábil, 5(2), 1-19.
Torman, V. B. L., Coster, R. & Riboldi, J. (2012). Normalidade de variáveis: métodos de verificação e comparação de alguns testes não-paramétricos por simulação. Revista HCPA, 32(2), 227-234.
Ullmann, A. A. (1985). Data in search of a theory: A critical examination of the relationships among social performance, social disclosure, and economic performance of US firms. Academy of management review, 10(3), 540-557.
Waddock, S. A. & Graves, S. B. (1997). The corporate social performance–financial performance link. Strategic management journal, 18(4), 303-319.
Zhao, X. & Murrell, A. J. (2016). Revisiting the corporate social performance‐financial performance link: A replication of Waddock and Graves. Strategic Management Journal, 37(11), 2378-2388.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 Journal of Education and Research in Accounting (REPeC)
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors who publish with this journal agree to the following terms:
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under Creative Commons Attribution 3.0 Unported License, which allows the sharing of the work and recognition of authorship and its initial publication in this journal. This license allows others to distribute, remix, adapt, or create derivative works, even for commercial purposes, provided credit is given for the original creation.
b)There is no financial compensation to the authors in any capacity, for articles published in RePEc.c) The articles published in RePEc are the sole responsibility of the authors.