Acquisitions tempt companies intent on accelerating their growth. Executives continue to convince themselves that acquisitions offer a good chance of creating value—even though numerous studies show that most deals fail to do so. A wide range of strategies can motivate acquisitions, but some are more... [read more...]

Many people look at total returns to shareholders (TRS) to assess value creation. Looking at TRS without understanding its components will lead to an inaccurate view of corporate performance. The authors point out that different companies can arrive at the same level of TRS in very different ways, and... [read more...]

Which drives the market: irrational investor behavior or underlying economic fundamentals? Yes, valuations of traded stocks can deviate from intrinsic value. The depressed market of the 1970s and the bubble of the late 1990s are examples. But significant discrepancies between market value and intrinsic... [read more...]

Toward the end of the 1990s, a wave of M&A grew larger and larger. As the wave swept across the business landscape it destroyed shareholder value. Executives riding the wave showed a stunning lack of discipline, leading to as many as two-thirds of all transactions failing to create value for the acquirers... [read more...]

Market fundamentals explain share price movements over the long term. Investor biases, myopia, and expectations of long-term stock performance do not systematically cause share prices to deviate from fundamentals over periods of three years or longer. In the short term, these factors can cause shares... [read more...]

Emotions can drive market behavior in a few short-lived situations. But fundamentals still rule.

For several decades, practically no one challenged the explanations of financial decisions offered by neoclassical economics. According to this theory, financial markets accurately reflect the underlying value of financial assets, and prices immediately incorporate new information. Recently, behavioral... [read more...]

A properly executed multiples analysis can make financial forecasts more accurate.

By conducting an accurate multiples analysis, you can do more than improve the accuracy with which you value projects. Multiples analysis can also be a useful tool to help executives form a clearer picture of their own and their competitors’ strengths, according to this article. The authors have provided... [read more...]

Ah the allure of the Orient; its magnificent, centuries-old historic sites and cultures steeped in ancient traditions… And what every CEO prizes most - impressive economic growth rates. But with the magic so strong, how can executives make sure they are not blinded by the optimistic spell of how things... [read more...]

Good reasons exist for caution about emerging markets but, according to Goedhart and Haden, companies have a pronounced tendency to overestimate risks associate with volatility while also underestimating the performance of existing businesses. Attention given to a few high-profile problems have distorted... [read more...]