Practitioners and some academics use potential dividends rather than actual payments to shareholders for valuing a firm’s equity. We underline the differences between the two methods and present some arguments supporting the thesis that firm valuation with potential dividends overstate the actual value of the firm’s equity. In particular, consistently with DeAngelo and DeAngelo (2006, 2007), we underline that cash flows create value for shareholders only if they are withdrawn from the firm, and that the use of potential dividends may lead to contradictions.

Potential dividends versus actual cash flows in firm valuation / Magni, Carlo Alberto; Vélez Pareja, Ignacio. - In: THE ICFAI JOURNAL OF APPLIED FINANCE. - ISSN 0972-5105. - STAMPA. - 15:7(2009), pp. 51-66.

Potential dividends versus actual cash flows in firm valuation

MAGNI, Carlo Alberto;
2009

Abstract

Practitioners and some academics use potential dividends rather than actual payments to shareholders for valuing a firm’s equity. We underline the differences between the two methods and present some arguments supporting the thesis that firm valuation with potential dividends overstate the actual value of the firm’s equity. In particular, consistently with DeAngelo and DeAngelo (2006, 2007), we underline that cash flows create value for shareholders only if they are withdrawn from the firm, and that the use of potential dividends may lead to contradictions.
2009
15
7
51
66
Potential dividends versus actual cash flows in firm valuation / Magni, Carlo Alberto; Vélez Pareja, Ignacio. - In: THE ICFAI JOURNAL OF APPLIED FINANCE. - ISSN 0972-5105. - STAMPA. - 15:7(2009), pp. 51-66.
Magni, Carlo Alberto; Vélez Pareja, Ignacio
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11380/614675
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