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Case Study : Quantifying Payout Policies’ Impacts on the Value of Davide Campari-Milano N.V
Ort / Verlag
ProQuest Dissertations & Theses
Erscheinungsjahr
2023
Quelle
ProQuest Dissertations & Theses A&I
Beschreibungen/Notizen
The fast growth in share repurchases and the decrease of dividend payout rates in the late 1990s led analysts to put less weight on equity valuation tools based on firms’ dividend yields. A reasonable adjustment to think of is to add to the dividend yield a share repurchase yield, for instance. However, repurchasing shares can have many more reasons of being than to be a shareholder payout method and can be much more irregular than the most commonly used payout method: dividends. In fact, many corporations that repurchase shares also issue new shares, primarily, but not exclusively, to fund employee stock options’ exercises.Given the growing and related importance of these operations, incorporating information on share repurchases into valuation models became more complicated. At the same time, the use of financial engineering as a tool for managing earnings per share (EPS) has also grown, in order to increase perceived value to attract stakeholders or to increase executives’ bonuses, when these are attributed depending on metrics as such.This case study requires students to not only analyse the impact of repurchases and issuances on EPS, but also to measure and evaluate the overall impact of cash dividends, repurchases and issuances on the firm’s capital structure, equity valuation models and relevant yields.The case was built using real world information extracted from the company’s reports and announcements, as well as other public information regarding equity valuations done by real investment banking firms over the studied period, although the characters presented in the story are fictitious.