Jaime Sabal

Bio: Jaime Sabal is an academic researcher from Ramon Llull University. The author has contributed to research in topics: Emerging markets & Adjusted present value. The author has an hindex of 5, co-authored 9 publications receiving 125 citations. Previous affiliations of Jaime Sabal include University of Oxford.

The Discount Rate in Emerging Markets: A Guide

Abstract: There is considerable controversy about the correct discount (or “hurdle”) rate to use when performing valuations of investments in real assets in emerging markets. The topic is particularly relevant because of the growing need to evaluate privatizations, direct private acquisitions, and greenfield investments in new productive facilities throughout the world. This article argues that the traditional practitioners' approach of building a country risk premium into the discount rate is generally inappropriate, mainly because country risk is not the same for all projects nor is it totally systematic. Moreover, there is no reason for the discount rate to be closely related to the spread on the government bonds of the country concerned. The author also points out that, in determining the appropriate discount rate, what is important is not the segmentation of the market, but the extent to which the investor is locally or globally diversified. The article accordingly reviews a selected group of models for calculating discount rates for both segmented and integrated markets. Adjustments to the valuation procedure are also suggested for cases in which investors are not well diversified or the investment is illiquid.

Financial Decisions in Emerging Markets

Abstract: Financial Decisions in Emerging Markets is the first corporate finance book to take into account the context of emerging markets and the problems they present, including the relative lack of market efficiency. It reviews financial theory, with a focus on investment and financing decisions as they relate to investors in emerging markets. The objective of the book is to juxtapose the assumptions of financial theory against the realities prevailing in emerging countries and to propose more relevant approaches for investment analysis. This book provides readers with a solid background to evaluate investments in emerging countries.

WACC or APV

Abstract: Miller and Modigliani's seminal papers (1958, 1963) gave rise to two alternative methodologies for project and firm valuations: the Weighted Average Cost of Capital (WACC) and Adjusted Present Value (APV). As is often the case of many larger firms in industrialized economies, whenever a target debt ratio is set up for the long term, WACC might be a good approximation. However, APV has certain advantages making it more convenient for smaller companies with unstable debt ratios, in countries with complex tax legislation and in emerging markets where high economic uncertainty makes the leveraging decision much more opportunistic.

Financial Decisions in Emerging Markets

Abstract: Financial Decisions in Emerging Markets is the first corporate finance book to take into account the context of emerging markets and the problems they present, including the relative lack of market efficiency. It reviews financial theory, with a focus on investment and financing decisions as they relate to investors in emerging markets. The objective of the book is to juxtapose the assumptions of financial theory against the realities prevailing in emerging countries and to propose more relevant approaches for investment analysis. This book provides readers with a solid background to evaluate investments in emerging countries.

WACC or APV?: The Case of Emerging Markets

Abstract: MM’s seminal papers (1958, 1963) gave rise to two alternative methodologies for project and firm valuations: the Weighted Average Cost of Capital (WACC) and Adjusted Present Value (APV). Whenever a target debt ratio is set for the long term, as is often the case with larger firms in industrialized economies, WACC might give a good approximation. However, APV has certain features that make it more suitable for emerging markets, where high economic uncertainty makes the leveraging decision much more opportunistic and tax legislation tends not only to be quite complex but also to vary from country to country.

Integrative Modeling of Emotions in Virtual Agents

Abstract: To develop a robot that is able to recognize and show affective behavior, it should be able to regulate simultaneously occurring tendencies of positive and negative emotions. To achieve this, the current paper introduces a computational model for involvement-distance trade-offs, based on an existing theoretical model. The main mechanisms of this model have been represented as regression equations, using the LEADSTO modeling environment. A number of simulation experiments have been performed, which indicated that the model is adequate for simulating the dynamics of involvement-distance trade-offs and their influence on satisfaction. More specifically, the experiments confirmed the empirical finding that positive features do not exclusively increase involvement.

Corporate Governance, Commitment to Business Ethics, and Firm Valuation: Evidence from the Korean Stock Market

Abstract: A variety of stakeholders have long been interested in the factors that are related to firm valuation. This article investigates why companies with more comprehensive corporate governance (CG) have a value premium over companies with less comprehensive CG. We posit and find that the cost of equity capital (COC) decreases with the strength of CG, suggesting that the value premium stems from the lower COC for more comprehensive CG. We also find that the COC is lower for companies with strong commitment to business ethics (BE) than for those with weak commitment to BE and that the beneficial effect of CG on the COC is more pronounced for companies with weak commitment to BE than for those with strong commitment to BE. Companies with more comprehensive CG tend to exhibit strong commitment to BE, but the beneficial effect of corporate ethical commitment is not completely subsumed by CG. Our results suggest that companies could lower their cost of equity capital and increase firm value by adopting more comprehensive CG practices and committing to higher standards of BE.

The Discount Rate in Emerging Markets: A Guide

Abstract: There is considerable controversy about the correct discount (or “hurdle”) rate to use when performing valuations of investments in real assets in emerging markets. The topic is particularly relevant because of the growing need to evaluate privatizations, direct private acquisitions, and greenfield investments in new productive facilities throughout the world. This article argues that the traditional practitioners' approach of building a country risk premium into the discount rate is generally inappropriate, mainly because country risk is not the same for all projects nor is it totally systematic. Moreover, there is no reason for the discount rate to be closely related to the spread on the government bonds of the country concerned. The author also points out that, in determining the appropriate discount rate, what is important is not the segmentation of the market, but the extent to which the investor is locally or globally diversified. The article accordingly reviews a selected group of models for calculating discount rates for both segmented and integrated markets. Adjustments to the valuation procedure are also suggested for cases in which investors are not well diversified or the investment is illiquid.