G30 - Corporate Finance and Governance: GeneralReturn

The article analyses expected impacts of The Anti-Tax Avoidance Directive (ATAD) implementation, respectively planned amendment to the Czech Income Tax Act, which implements among others also administrative limitations on tax deductibility of interest expenses, and tax shields used in company valuation. The article presents time distortion in calculation of tax deductibility of interest expenses and the amount of interest-bearing capital after the regulation on a practical example. Then it defines general formulas for the calculation of tax shields resulting from the regulation including the model for the second phase of valuation. The article states the main topics in business valuation which will be affected by the regulation.

For the purpose of transparency and repeatability, a standardization of processes in financial accounting and assets valuation is a long-term trend. The process of standardization within both of these fields takes place relatively separately, which causes some problems. One of possible problems is that within different standards the same terms are defined in different ways. Just one such an example is more deeply examined in this text. The difference of the definition of fair value within IFRS and IVS being used in practice can lead to a lot of misunderstandings. This text compares the approach to the fair value within both of the standards, points out impacts of the difference during practical use of standards. Furthermore there is an examination based on analysis of 2014 annual financial reports of sample of 24 companies listed on the Prague Stock Exchange regarding extent and quality of application of the standard IFRS 13 aiming to find out attitude of users of IFRS 13 to the definition framework of fair value. The examination leads to the result that application of IFRS 13 by these companies doesn't correspond to the requirements of the standard.

The objective of this paper is to analyze the impact of cross-border merger and acquisitions on shareholders wealth of acquiring firms from developing countries with a focus on capital market integration. I examine whether announcement effects of takeovers differ for shareholders in developing countries with a developing capital market and highly growing economy from studies for developed markets. Data is used for TIMPS from the period 2000-2010 and standard event study methodology is used for this purpose. I find significant positive abnormal returns for acquirers. The study could be relevant for shareholders, global fund managers as well as financial regulators.

The main role of accounting standardization is to provide uniform view on financial position of reporting company. The uniform reporting contributes to trustworthy image and understanding from investors and regulatory authorities. This article deals with information obligatory rules in the course of IPO. We focus on exchanges because they are those that use IFRS and US GAAP concepts in listing rules. Different approaches of exchanges are compared in listing rules of the most important exchanges (NYSE, NASDAQ, LSE and HKSE).

The paper shows the way you can in forensic practice solve problem of proving the existence of excessive trading (churning) in client securities account held by securities dealer. Mentioned securities account held derivatives also. Derivatives are especially futures, options and ETF funds that invest a substantial portion of its own assets in futures and options. Furthermore, the work describe how it is possible in the forensic practice prove the "control of trader over customer account". It is also discussed the issue of calculation of indicators (esp. Cost to Equity) and the absence of clear algorithms that describe how the calculations of indicators of churning should be done and not only for portfolios (client accounts) containing derivatives. Special attention is paid to the determination of the size of property damage (loss) calculation by churning to the client.

Competitive environment enables healthy operation only to those companies that are able to perfectly manage not only the business side of the entrepreneurial activities (sale of products and services surely is purpose of existence of any company), but also the financial side which constitutes a significant part of strategic decision-making process. And thus, from the view of corporation operating, the most important parameters are profitability and liquidity. The emphasis is also put on aspects of development of economic cycle and trust indicators. The comparison was made on the level of business branches. The aim of the paper is to evaluate the practical view of the theoretical data resulting from the fact that the low level of profitability will

Firms listed in Business Register are requested to publish their financial statements till the end of the consequent period at the latest in documents collection of the Register. This legal requirement follows the EU legislation. The main purpose is to protect third parties when negotiating business contracts. However, based on our research, majority of Czech firms fail in this requirement. Paper also focuses on the researching of insolvent firms and discusses fulfilling of the presenting obligation.

From theoretical point of view net present value is the best technics for investment project evaluation. Internal rate of return is not able to solve situations with non-conventional cash flows and with mutually exclusive projects. Modified internal rate of return is more universal criterion. It does not use the iterative procedures and assumes that cash flows are reinvested at the firm's required rate of return. Modified internal rate of return is so depend up required rate of return as net present value.

The paper deals with the influence of the global financial crisis on labor productivity in Czech companies belonging to analyses of the Ministry of Industry and Trade of the Czech Republic. It tries to illustrate businesses' adaptation to new conditions. The article focuses on the confirmation or refutation of the assumption that after a decline in labor productivity, which resulted from the global financial crisis, enterprises reached the pre-crisis level no later than 2011. Furthermore, the object of the article is the discovery, how has the companies' restraint of recruiting new staff impact on the development of the personal costs.

The objective of this paper is to examine the use of effective tax rates on different types of capital assets and sources of financing and to assess on the base of calculation of the tax wedges the degree to which taxation affects the incentive to undertake investment. The methodology used to calculate effective tax rates on investments is based on an approach developed by the King and Fullerton methodology (1984), which has become the most widely accepted method adopted to calculating effective tax rates (tax wedges). The tax wedge will vary according to the type of asset: machinery, buildings, inventory and the type of finance sources: new equity, debt, retained earnings. Effective tax rates take into account not only the statutory corporate tax rate, but also other aspects of the tax system which determine the amount of tax paid and profitability of investment, a consideration of personal taxes. The tax system that seeks to raise revenue in ways that avoid distortion effects is considered neutral tax system. The aim of this article has been to assess on the base of calculation of the tax wedges the degree to which taxation affects the incentive to undertake investment in the Czech Republic (comparison in years 2000 and 2010).

One of main targets of each company is performance growth and thrifty approach to the life environment. It is evident that owners and managers need to have available information about environmental issues and their economic results in the social environment. That´s why the accounting system should be conformable to new information needs; it should cover the economic, environmental and social connections of business in the area of expenses/costs and incomes. It is necessary to work with the allocation of costs to responsibility centres, business activities and outputs for purposes of the right decision making of owners and managers. With the decision making of environmental issues it is not possible to omit the existence of externalities and their negative and positive results in the scopus of company sustainable development.

The contribution is about the relation between managerial accounting and corporate finance from the scientific and pedagogical point of view. It has been proved that not even the modern concept of managerial accounting based on the complex conception of management and measure of the strategic position of enterprise including the usage of information from external environment and so called "soft skills" is not in controversy with the theory of corporate finance oriented on the financial decision processes with the aim to maximize the market value of the firm. On the contrary this modern conception of strategic managerial accounting could very strongly improve the quality of provided information for the purpose of financial decision. It relates mainly the area of investment decision, financial analysis and planning, economic value added, inventory management and valuation of corporate. Both subjects do not coincide with each other even from the pedagogical point of view with the exception of some subareas. It is possible to recommend to project into the program of education wider references to managerial accounting as the high-quality source of necessary information for decision.

The aim of this contribution is to analyze if does the debt policy theoretically and practically matter in concrete firm. The contribution is based on a basic analysis of single theories and their possible usage in the process of concrete optimizing. Also the practical usage of theories is analyzed including the solution of application problems of single theories. The traditional theory and the theory of spouses Neumaier´s are the best from the point of view of their ability to identify empirically the concrete indebtedness. The enterprise has to decide firstly if to start the process of active optimizing or if it is satisfied with the following of branch standards or it is satisfied with complying with the pecking order theory. The enterprise could use both theories stipulating the concrete empirical value of indebtedness and choice the value which better fulfill the further aspects such as for example dimension of Brealey-Myers theory. The optimizing structure is not possible to identify, but only to estimate because of the different approaches to the solution of the application problems of single theories. The optimal capital structure will vary because of the subjective approach to the process of optimizing.

Some countries take IFRS without hesitation, the other accept them only in part or even prevent their acceptance. Judge at al. (2010) concluded that the degree of which IFRS are included within national economies, is the resultant of load pressure exerted by the institutions: this pressure can be coercive, imitative or normative. The discussion on article aims to confirm that the process of adopting IFRS is controlled by the pressure of the official institutions rather than by economic efficiency for those entities who implement IFRS. On the other hand, the authors' opinion, that more attention was attached to the consequences of the adoption of IFRS than to the reasons for their adoption, is controversial. As regards the European Union we can demonstrate that the costs and benefits associated with the implementation of IFRS is absolutely insufficient.

The increasing requirements for the management accounting in relation to environmental and social issues are reflected in the costing of products. The calculation of the products costs is for the evaluating of the products benefits. Traditional management accounting assessed the benefit on the basis of products contribution and profit. These measures take various modifications and expression in relation to management decisions. On the other hand, usually based only on cost-benefit expressed in the accounting, financial and economic base. Regarding the focus on social and environmental aspects, it is necessary to take into account the environmental and social costs and benefits. The inspiration for this may be life cycle costing. Costing of products respecting environmental and social aspects should include in addition to the usual items - selling price, variable costs, fixed costs, costs of capital as well as other environmental and social costs and benefits, which are not included "traditional" costs. (in particular the externalities). The results would be overall economic benefits of undertaking not but take into account the social environmental factors.

This paper focused on detailed relationship between profitability, financial performance and financing by debt. The structure of capital resources, the level of debt, in particular, and the costs of individual financial resources represent the most important factors influencing profitability and firm´s value belong to the most significant steps in financial decision making. The task for financial analysis is to explore if debt was profitable or not, using following criteria of advantageous use of debt (equity multiplier, interest margin, financial leverage index, degree of financial leverage). The level of debt is considered the main factor of financial risk and financial stability. Profitability of invested capital (return on investments and return of equity) must be always considered against the financial risk. Shareholders, managers, creditors are interested in satisfactory financial performance together with adequate financial situation that will enable to achieve lasting development of the company.

The article is devoted to Frank Donaldson Brown who is author of very frequent used model of decomposition return on investment (assets) and return on equity. First part describes his successful career of manager in E. I. du Pont de Nemours and Company and General Motors Corporation. Second part introduced original model from years of 1912 a 1919. Third part deals with academic and practical responses of the model.

TNCs get more and more influence in economy of individual countries. They take the principle place in global economy. The article deals with the TNCs role in country's economy. It draws attention to their positive and negative influence. Attention is paid to goals and specific features of transnational corporations' financial management and to transfer mechanism for distribution of funds. The article also describes in detail specialities and different alternatives of short-term and long-term transnational corporations' financial management.

The contribution briefly describes the research executed by R. Amit and C. Zott and assesses opportunities for its utilization within business valuation. The research focused on determination of specific sources of new value creation in e-business. The main sources proved to be efficiency, complementarities, lock-in and novelty. The article suggests these results of the research to be utilized for valuation of e-business firms. A valuer should analyze these four specific value sources especially within strategy analysis and within analysis of profit margin.

The reviewed article focuses on elaboration of the boundary value category that is viewed as a quantity with more dimensions. Within preparation for bargaining during sale of a firm, partners must clear up not only the boundary value but also other bargain parameters. They must do it in such way that will increase their wealth in comparison with situation when the transaction is not realized. In this general position the boundary model has only theoretical sense but it can be viewed as the first step toward further development of Koln school theories.

The article presents the key milestones in the hedge funds development and addresses the current state of the hedge fund industry. It defines the term hedge fund is defined and discusses the key hedge fund investment strategies. In the section on problems associated with the measurement of hedge fund returns the key biases in the hedge fund indices are discussed. Based on average annual returns, CAPM's alpha, Sharpe and Sortino ratios, the hedge funds returns between 1994 and 2008 are analyzed and compared to returns on selected market indices - S&P500, MSCI World a Russell 2000. The key conclusion from the return analysis is that although some hedge fund strategies managed to beat the selected market indices, hedge funds on the aggregate level were not able to provide higher returns than the market benchmarks if the biases specific for hedge fund indices are taken into consideration. However, the key potential of hedge funds is in their ability to flexibly respond to extreme market conditions. This fact is evidenced in both lower volatility of hedge fund returns and the above average return relative to market indices in times of capital market crises.

The article is focused on possible contingent liabilities valuation procedures. The first part of this article is concerned with necessity of contingent liabilities evaluation from the mergers, acquisitions and other business combinations point of view. It highlights possible negative effects arisen by ignoring the value of contingent liabilities. The second part of this article discuses suitable valuation methodology for contingent liabilities evaluation. The most attention is attracted by simulations and by Monte Carlo method. In the third part there is a practical example of contingent liability valuation. The process is present by using Monte Carlo methodology and by the support of Crystal Ball software.

The one of many indicators' in measurement of the financial efficiency is finally value of firm. By process of financial planning have to be main target's estimated qualitative and quantitative so, that the value of firm on the end of planning's period will be higher than on the beginning of this period. For measurement is possible to use the tools of value management.

The article concerns some problems, which challenge the valuators of firms. They are following: the choice the appropriate relevant market as the model for estimation of the future firm economic development, the relation between the firm strategic and financial analysis, the relation between the amount of depreciations and investments in future years, the determination between the valuation for the finite or infinite time, application of the lower discount rate for the I. phase of the valuation and the warning about the faults in formulations the regression analysis between the development of the relevant market and the economic development of the firm. Author warns about the simplification of these problems in valuation reports.

Investment appraisal methods by using of discounted cash flow have been more often applied to firm's projects evaluation in developed countries and also in Czech Republic. However at their application in practice various errors are often observed which unfavorably influence on quality of projects evaluation. Wrong proceedings appear especially at quantification of cash flow from project and at a selection of required rate of return. Capital expenditures are often considered in a strict sense, only in form of investment costs recorded in accounting. They do not include various further expenditures connected with investments and necessary for complex evaluation of project. Also net operating cash flow from project often do not take into consideration principle of increasing, inflation influence, they are often very optimistic and do not respect some further principles of capital planning. Required rate of return is not always in symmetric relation with calculation of net operating cash flow. Cost of debt as a part of required rate of return is incorrectly identified only with interest and not in respect of short term credits, which are repeating permanently.

Both our and foreign practice prefer the discounted cash flow method for business valuation. The article analyses some relations between the discounted cash flow method and other income methods based not on cash flows but on earnings. Especially the economic value added method and the capitalized net income method belong among such methods. One of main surveyed relations between income methods is a fact that investments are captured in discounted cash flow method through expenditures while in methods based on earnings through cost of capital necessary for these investments. The article also researches relations between earnings and paid dividends within income valuation of a firm and points at one of advantages of the economic value added method compared to the discounted cash flow method - lower portion of continuing value in total value of a firm and consequently lower sensitivity to hardly estimated parameters for the second phase.

The paper briefly summarizes different capital structure theories of firms. It also informs about the results of last analyses dealing with capital structure rate of debt determinants. It arrives at a conclusion, that these analyses confirm necessity of multi-criteria access to choice of capital structure: besides cost of capital minimization must be take into consideration especially size and structure of assets, dynamics of profit and other factors.

The study of the history of theoretical opinions enables better to estimate the direction of future research. Objective of the article is to show main developmental lines in several aspect of financial theory concentrated on material investments and to say thesis about further development of this theory. Followed problems were history of interest, the use of interest calculation for investment decisions, beginning of investment theory, relationship between internal rate of return and net present value, empiric studies of the use of investment methods in practise, the organizational aspect of investment decision making process and simulation.

Economic rising request a new types and form and resources for financing needs and investing. Clear chance appears use of rating in financials decisions. Rating impacts capital structure and has influence final decision on acceptance of capital investment and capital structure. Anticipation of credit rating is possible in the case reflect the long-term development value of firm.

This is the review of the book of Milan Hrdý from the Faculty of Economics of Westbohemian University in Pilsen with the title of The evaluation of effectiveness of investment projects of EU in the Czech Republic published by ASPI Publishing in 2006. The book analyses the basic problems which the reader meets in the process of evaluation of these projects. Concrete theoretical and practical experiences of author which is specialized in investment decision are projected into this book.

The reviewed article deals with possibility of research of benefits from transition to international accounting standards. These benefits are seen especially in possibility to improve investors' knowledgeableness, thereby to reduce risk for investors and to reduce capital costs. However recapitulation of studies results shows that initial hypothesis failed to be validated. The author assumes that further research will bring better results. But his expectation is not too realistic. It is evident that it will be hardly possible sometimes to confirm empirically this hypothesis due to limited ability to measure capital costs and to single out an effect of international accounting standards introduction.

Agency theory for the first time appeared in literature in 70s years at the works of Ross (1973), Jensen and Meckling (1976). Their starting points were transaction costs, asymmetric information, moral hazard and adverse selection. This theory gradually enforced not only in economic scientific disciplines but even in sociology and politics. From point of the view of corporate finance is the most important for the development of the discipline impact of agency costs on market value of firm. The theory has significant place in the explanation of optimal capital structure and dividend policy. Increasingly more and more representatives is appearing in the Czech scientific literature as well.

The contribution describes and discuses an interesting study that examines differences between firms' values estimated using valuation methods and their market values based on stock prices achieved on capital markets. The research was made on a sample of firms that reorganize under the Bankruptcy Code. The contribution underlines some chosen aspects and also some possible problems of the study.

The Czech accounting norms are definitions of regular financial statements, irregular financial statements and interim financial statements. For requirements irregular accounting information practice life need information in type financial statements in another situations. These situations are not introduced in the norm and using these financial statements is disagreement with Accounting Low. This fact can have serious consequence in case which the agreements and the write-ups are referring to illegal financial statements and another. Result for this problem can be in exchange conception interim financial statements, so in according with the example included in IAS - 34 Interim report, that is periodical out of ordinary financial statements for example quarterly.

Management accounting information system can be perceived in two relatively independent concepts, seen as product costing or responsibility accounting. Product costing purveys detailed information on actual product profitability (with classification according to customer segments or distribution channels in detail) and profitability analyses. On the other hand, responsibility accounting employs different criteria to measure the performance of centres in order to set the responsibility for fundamental financial indicators (costs, revenues and profit). In a banking sector, product, organisational and cliental concepts of management accounting unite in one conceptually congruent approach whose main criterion is actual profitability in triple analytical segmentation. The difference is caused by characteristic features of products in a banking sector, further by concrete form of production process and thus closely related system of responsibility management.

The paper discusses the possibility of practical application of the results of the empirical study of private benefits of control in the conditions of the Czech Republic. Firstly it emphasizes the theoretical contribution of the alternative view of control premium. In the second part it draws attention to the methodological and application problems of the results of the study. It explains why they are not general enough to become the lead to estimation of the control premium in business valuation practice.

The paper deals with special long-term financial management problems. Attention is devoted to development (in theory and in practice) of investment decision-making process, long-term financial sources and state financial support of firm investment including public private partnership.

The Company Valuation is the important base for the set of business transactions, because the Book Value is not regarded as good picture of the real company assets. There are the three basic Valuation Approaches: the Income, Cost and Market ones. In Czech practice the last Approach is not used often for the insufficiency of appropriate data. The article presents the results of 42 valuation works, in which the students of the Institute of Property Valuation of University of Economics in Prague used both the Income Approach and Cost Approach (IOM VŠE, 2004). The article compares the results of these two approaches with the book value of valuated companies and with the final results of companies´ valuations. The aim of the article is to judge if there are the significant differences between results of mentioned approaches, by using simple comparisons. This study, according to the five points of view (5 statistic tables) proved that the results of the Cost Approach Valuations exceed the results of the Income ones. The reason is the low productivity of the company assets and the problems with the sale of companies´ products. Generally - according to this study, the Company Valuations are underestimated in average, or by other words, the efficiency of important number of studied firms is lower than according to the firms´ asset it would be.