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Başlık Belirtilmemiş

Year 2013, Volume: 5 Issue: 3, 63 - 72, 01.09.2013

Abstract

This article introduces the models for estimating the cost of equity for energy network utilities in emerging economies and discusses them from the perspective of finance theory. For this purpose, a comprehensive review of literature is conducted. The available models in the literature are classified and evaluated in detail. Several versions of CAPM have been developed to estimate the cost of equity in emerging markets since the 1990s. However, the majority of the models are thought to violate the main assumptions of CAPM. On the other hand, all estimation methods look at the issue from the perspective of a global investor with a diversified portfolio. Emerging markets are either segmented from or partially integrated with the global market and frequently there are limits on local investors in these markets to invest in the international market. As a result, the cost of equity to a local investor could be relatively different from that to a global investor. In conclusion, both in practice and theory, there are very diverse and controversial proposals, which do not provide good guidelines for energy regulators in emerging countries in order to fulfill their duties regarding the tariff regulation of energy network utilities

References

  • BEKAERT, G. (1995). "Market integration and investment barriers in emerging equity markets", The World Bank Economic Review, 9(1): 75-107.
  • BEKAERT, G. and HARVEY, C.R. (1995). "Time-varying world market integration", Journal of Finance, 50: 403-444.
  • BEKAERT, G. and HARVEY, C.R. (2002). "Research in emerging markets finance: Looking to the future", Emerging Markets Review, 3: 429-448.
  • BLACK, F. (1972). "Capital market equilibrium with restricted borrowing", Journal of Business, 45(3): 444-455.
  • BREALEY, R.A., MYERS, S.C., and ALLEN, F. (2008). "Principles of Corporate Finance", Ninth Edition, McGraw-Hill Education (Asia), Singapore.
  • BRUNER, R. F., CONROY, R. M., ESTRADA, J. and KRITZMAN, M. (2002). "Introduction to Valuation in Emerging Markets", Emerging Markets Review 3: 310-324.
  • BUCKLEY, A. (2004). "Multinational Finance", Fifth Edition, Pearson Education Limited, Essex, UK.
  • BUTLER, K. C. (2004). "Multinational Finance", Third Edition, Thomson & South-Western, Mason, Ohio.
  • COPELAND, T. E., WESTON, J. F. and SHASTRI K. (2005). "Financial Theory and Corporate Policy", Fourth Edition, Pearson Addison Wesley, Boston, 60-77, 140-160.
  • DAMODARAN, A. (2003a). "Country risk and company exposure: Theory and practice", Journal of Applied Finance, Fall/Winter: 63- 76.
  • DAMODARAN, A. (2003b). "Valuation in emerging markets", Choi, F.D.S. (ed.), International Finance and Accounting Handbook, Third Edition, Chapter, 9, John Wiley & Sons, Inc., New Jersey.
  • DAMODARAN, A. (2009a). "Volatility rules: Valuing emerging market companies", September, http://pages.stern.nyu. edu/~adamodar/pdfiles/papers/emergmkts.pdf, 24.06.2012.
  • DAMODARAN, A. (2009b). "Equity risk premiums (ERP): Determinants, estimation and implications", October 22, http:// papers.ssrn.com/sol3/papers.cfm?abstract_id=1492717, 22.06.2012.
  • DAMODARAN, A. (2010). "Measuring country risk", http://www.qfinance.com/contentFiles/ QF01/g4fqn4jz/10/0/ measuring-country- risk.pdf, 17.07.2012.
  • ERB, C. B., CAMPBELL, R. H. and VISKANTA, T. E. (1995). "Country risk and global equity selection", Journal of Portfolio Management, 21: 74-83.
  • ERB, C. B., CAMPBELL, R. H. and VISKANTA, T.E. (1996). "Expected returns and volatility in 135 countries", Journal of Portfolio Management, Spring: 46-58.
  • ESTRADA, J. (2000). "The cost of equity in emerging markets: A downside risk approach", Emerging Markets Quarterly, 4: 19-30.
  • ESTRADA, J. (2007). "Discount rates in emerging markets: Four models and an application", Journal of Applied Corporate Finance, 19(2): 72-77.
  • GODFREY, S. and ESPINOSA, R. (1996). "A practical approach to calculating costs of equity for investments in emerging markets", Journal of Applied Corporate Finance, Fall: 80-89.
  • GOZEN, M. (2011). "Cost of Capital Estimation for Energy Network Utilities: Revisiting from the Perspective of Regulators", Dokuz Eylül Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 26(2): 37-68
  • GOZEN, M. (2012). "Determining the cost of capital for Turkish electricity distribution utilities: Analysis and recommendations", Istanbul University Journal of the School of Business Administration, Vol:41, No:1, 62-79.
  • GREEN, R. and PARDINA, M. R. (1999). "Resetting Price Controls for Privatized Utilities: A Manual for Regulators", EDI Development Studies, The World Bank, Washington, D.C.
  • HARVEY, C. R. (1995). "Predictable risk and returns in emerging markets", The Review of Financial Studies, 8(3): 773-816.
  • HARVEY, C. R. (2005). "12 ways to calculate the international cost of capital", October 14, http://faculty.fuqua.duke.edu/ ~charvey, 24.05.2012.
  • KENNEDY, D. (2004). "Role of Regulatory Arrangements in Developing the Power Markets", Bielecki, J. and Desta, M.G. (eds.), Electricity Trade in Europe: Review of the Economic and Regulatory Challenges, Kluwer Law International, The Netherlands, 155-178.
  • LEE, C., NG, D. and SWAMINATHAN, B. (2003). "International asset pricing: Evidence from the cross section of implied cost of capital", 14th Annual Conference on Financial Economics and Accounting (FEA), November 1, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=485762, 20.07.2012.
  • LEE, C., NG, D. and SWAMINATHAN, B. (2009). "Testing international asset pricing models using implied costs of capital", Journal of Financial and Quantitative Analysis, 44(2): 307-335.
  • LESSARD, D. (1996). "Incorporating country risk in the valuation of offshore projects", Journal of Applied Corporate Finance, 9: 52-63.
  • LINTNER, J. (1965). "The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets", The Review of Economics and Statistics, 47(1): 13-37.
  • MARISCAL, J. O. and HARGIS, K. (1999). "A long-term perspective on short-term risk: Long-term discount rates for emerging markets", Global Emerging Markets Report October 26, 1-23, Goldman Sachs Portfolio Strategy, USA, http://pages.stern.nyu.edu/~jmei/hargis.pdf, 19.07.2012.
  • MARISCAL, J. O. and LEE, R. M. (1993). "The Valuation of Mexican Stocks: An Extension of the Capital Asset Pricing Model to Emerging Markets", Goldman Sachs Latin American Research 1-18, http://faculty.fuqua.duke.edu/~ charvey/Teaching/BA456_2006/GS_The_valuation_of_mexican_stocks.pdf, 19.07.2012.
  • MCRAE, T. W. (1996). "International Business Finance: A Concise Introduction", John Willy & Sons, Inc., New York.
  • O'BRIEN, T. J. (1999). "The global CAPM and a firm's cost of capital in different currencies", Journal of Applied Corporate Finance, 12: 73-79.
  • PEREIRO, L. E. (2001). "The valuation of closely-held companies in Latin America", Emerging Markets Review, 2: 330-370.
  • PEREIRO, L. E. (2002). "Valuation of Companies in Emerging Markets: A Practical Approach", John Wiley & Sons, Inc., New York, 14-56, 104-107.
  • PEREIRO, L. E. (2006). "The practice of investment valuation in emerging markets: Evidence from Argentina", Journal of Multinational Financial Management, 16: 160-183.
  • PRATT, S.P. and GRABOWSKI, R.I. (2008). "Cost of Capital: Applications and Examples", Third Edition, John Wiley & Sons, Inc., New Jersey.
  • ROCHA, K., CAMACHO, F. and BRAGANCA, G. (2007). "Return on capital of Brazilian electricity distributors: A comparative analysis", Energy Policy, 35: 2526-2537.
  • ROSS, S.A. (1976). "The arbitrage theory of capital asset pricing", Journal of Economic Theory, December: 341-360.
  • SABAL, J. (2004). "The discount rate in emerging markets: A guide", Journal of Applied Corporate Finance, 16(2-3): 155-166.
  • SCHRAMM, R.M. and WANG, H.N. (1999). "Measuring the cost of capital in an international CAPM framework", Journal of Applied Corporate Finance, 12: 63-72.
  • SERCU, P. (2009). "International Finance: Theory into Practice ", Princeton University Press, Princeton, New Jersey, USA.
  • SHAPIRO, A.C. (2003). "Multinational Financial Management", Seventh Edition, John Wiley & Sons, Inc., New York.
  • SHARPE, W. (1964). "Capital asset prices: A theory of market equilibrium under conditions of risk", Journal of Finance September, 19(3): 425-442.
  • SOLNIK, B. (1974). "The international pricing of risk: An empirical investigation of the world capital market structure", Journal of Finance, 29: 48-54.
  • SOLNIK, B. (1977). "Testing international asset pricing: Some pessimistic views", Journal of Finance, 32: 503-511.
  • STULZ, R. (1999). "Globalization, corporate finance and the cost of capital", Journal of Applied Corporate Finance, 12: 8-25.
  • VOLL, S.P., BHATTACHARYYA, S. and JURIS, A. (1998). "Cost of Capital for Privatised Distribution Companies: A Working Paper for a Calculation for India", NERA Working Paper October, NERA, Washington, D.C., http:// www.nera.com/image/3867.pdf, 29.06.2012).
  • WATERSON, M. (1988). "Regulation of the firm and natural monopoly", Basil Blackwell Inc., New York. 1-15.
  • ZENNER, M. and AKAYDIN, E. (2002). "A practical approach to the international valuation and capital allocation puzzle", Global Corporate Finance Report July 26, SalomonSmithBarney, New York, London, http://finance. wharton.upenn.edu/~benninga/hungary/solomon2002.pdf, 20.05.2012.

Başlık Belirtilmemiş

Year 2013, Volume: 5 Issue: 3, 63 - 72, 01.09.2013

Abstract

Bu makale gelişmekte olan ekonomilerde enerji şebeke şirketleri için öz sermaye maliyetinin tahminine yönelik modelleri tanıtmakta ve bu modelleri finans teorisi açısından tartışmaktadır. Bu amaçla, kapsamlı bir literatür taraması yapılmıştır. Literatürde ulaşılan modeller sınıflandırılmış ve ayrıntılı olarak değerlendirilmiştir. 1990'lı yıllardan itibaren gelişmekte olan ülkelerde öz sermaye maliyetinin tahmini için CAPM modeline dayalı çeşitli modeller geliştirilmiştir. Ancak bu modellerin çoğunluğunun CAPM'in ana varsayımlarını ihlal ettiği düşünülmektedir. Diğer taraftan, tüm tahmin yöntemleri konuya çeşitlendirilmiş portföye sahip global bir yatırımcı açısından bakmaktadır. Gelişmekte olan ülkeler ya global piyasalar ile kısmen entegre ya da ayrışmış olmakta ve bazı durumlarda yerli yatırımcıların uluslararası piyasalarda yatırım yapmasına yönelik sınırlamalar bulunmaktadır. Bu nedenle, yerli ve global yatırımcılar için öz sermaye maliyeti birbirinden göreceli olarak farklı olabilmektedir. Sonuç itibarıyla, teori ve uygulamada gelişmekte olan ülkelerdeki enerji düzenleme kurumlarının enerji şebeke şirketlerinin tarifelerinin düzenlenmesine ilişkin görevlerini yerine getirmeleri için iyi kılavuz niteliğinde olmayan, farklı ve karşıt öneriler bulunmaktadır

References

  • BEKAERT, G. (1995). "Market integration and investment barriers in emerging equity markets", The World Bank Economic Review, 9(1): 75-107.
  • BEKAERT, G. and HARVEY, C.R. (1995). "Time-varying world market integration", Journal of Finance, 50: 403-444.
  • BEKAERT, G. and HARVEY, C.R. (2002). "Research in emerging markets finance: Looking to the future", Emerging Markets Review, 3: 429-448.
  • BLACK, F. (1972). "Capital market equilibrium with restricted borrowing", Journal of Business, 45(3): 444-455.
  • BREALEY, R.A., MYERS, S.C., and ALLEN, F. (2008). "Principles of Corporate Finance", Ninth Edition, McGraw-Hill Education (Asia), Singapore.
  • BRUNER, R. F., CONROY, R. M., ESTRADA, J. and KRITZMAN, M. (2002). "Introduction to Valuation in Emerging Markets", Emerging Markets Review 3: 310-324.
  • BUCKLEY, A. (2004). "Multinational Finance", Fifth Edition, Pearson Education Limited, Essex, UK.
  • BUTLER, K. C. (2004). "Multinational Finance", Third Edition, Thomson & South-Western, Mason, Ohio.
  • COPELAND, T. E., WESTON, J. F. and SHASTRI K. (2005). "Financial Theory and Corporate Policy", Fourth Edition, Pearson Addison Wesley, Boston, 60-77, 140-160.
  • DAMODARAN, A. (2003a). "Country risk and company exposure: Theory and practice", Journal of Applied Finance, Fall/Winter: 63- 76.
  • DAMODARAN, A. (2003b). "Valuation in emerging markets", Choi, F.D.S. (ed.), International Finance and Accounting Handbook, Third Edition, Chapter, 9, John Wiley & Sons, Inc., New Jersey.
  • DAMODARAN, A. (2009a). "Volatility rules: Valuing emerging market companies", September, http://pages.stern.nyu. edu/~adamodar/pdfiles/papers/emergmkts.pdf, 24.06.2012.
  • DAMODARAN, A. (2009b). "Equity risk premiums (ERP): Determinants, estimation and implications", October 22, http:// papers.ssrn.com/sol3/papers.cfm?abstract_id=1492717, 22.06.2012.
  • DAMODARAN, A. (2010). "Measuring country risk", http://www.qfinance.com/contentFiles/ QF01/g4fqn4jz/10/0/ measuring-country- risk.pdf, 17.07.2012.
  • ERB, C. B., CAMPBELL, R. H. and VISKANTA, T. E. (1995). "Country risk and global equity selection", Journal of Portfolio Management, 21: 74-83.
  • ERB, C. B., CAMPBELL, R. H. and VISKANTA, T.E. (1996). "Expected returns and volatility in 135 countries", Journal of Portfolio Management, Spring: 46-58.
  • ESTRADA, J. (2000). "The cost of equity in emerging markets: A downside risk approach", Emerging Markets Quarterly, 4: 19-30.
  • ESTRADA, J. (2007). "Discount rates in emerging markets: Four models and an application", Journal of Applied Corporate Finance, 19(2): 72-77.
  • GODFREY, S. and ESPINOSA, R. (1996). "A practical approach to calculating costs of equity for investments in emerging markets", Journal of Applied Corporate Finance, Fall: 80-89.
  • GOZEN, M. (2011). "Cost of Capital Estimation for Energy Network Utilities: Revisiting from the Perspective of Regulators", Dokuz Eylül Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 26(2): 37-68
  • GOZEN, M. (2012). "Determining the cost of capital for Turkish electricity distribution utilities: Analysis and recommendations", Istanbul University Journal of the School of Business Administration, Vol:41, No:1, 62-79.
  • GREEN, R. and PARDINA, M. R. (1999). "Resetting Price Controls for Privatized Utilities: A Manual for Regulators", EDI Development Studies, The World Bank, Washington, D.C.
  • HARVEY, C. R. (1995). "Predictable risk and returns in emerging markets", The Review of Financial Studies, 8(3): 773-816.
  • HARVEY, C. R. (2005). "12 ways to calculate the international cost of capital", October 14, http://faculty.fuqua.duke.edu/ ~charvey, 24.05.2012.
  • KENNEDY, D. (2004). "Role of Regulatory Arrangements in Developing the Power Markets", Bielecki, J. and Desta, M.G. (eds.), Electricity Trade in Europe: Review of the Economic and Regulatory Challenges, Kluwer Law International, The Netherlands, 155-178.
  • LEE, C., NG, D. and SWAMINATHAN, B. (2003). "International asset pricing: Evidence from the cross section of implied cost of capital", 14th Annual Conference on Financial Economics and Accounting (FEA), November 1, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=485762, 20.07.2012.
  • LEE, C., NG, D. and SWAMINATHAN, B. (2009). "Testing international asset pricing models using implied costs of capital", Journal of Financial and Quantitative Analysis, 44(2): 307-335.
  • LESSARD, D. (1996). "Incorporating country risk in the valuation of offshore projects", Journal of Applied Corporate Finance, 9: 52-63.
  • LINTNER, J. (1965). "The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets", The Review of Economics and Statistics, 47(1): 13-37.
  • MARISCAL, J. O. and HARGIS, K. (1999). "A long-term perspective on short-term risk: Long-term discount rates for emerging markets", Global Emerging Markets Report October 26, 1-23, Goldman Sachs Portfolio Strategy, USA, http://pages.stern.nyu.edu/~jmei/hargis.pdf, 19.07.2012.
  • MARISCAL, J. O. and LEE, R. M. (1993). "The Valuation of Mexican Stocks: An Extension of the Capital Asset Pricing Model to Emerging Markets", Goldman Sachs Latin American Research 1-18, http://faculty.fuqua.duke.edu/~ charvey/Teaching/BA456_2006/GS_The_valuation_of_mexican_stocks.pdf, 19.07.2012.
  • MCRAE, T. W. (1996). "International Business Finance: A Concise Introduction", John Willy & Sons, Inc., New York.
  • O'BRIEN, T. J. (1999). "The global CAPM and a firm's cost of capital in different currencies", Journal of Applied Corporate Finance, 12: 73-79.
  • PEREIRO, L. E. (2001). "The valuation of closely-held companies in Latin America", Emerging Markets Review, 2: 330-370.
  • PEREIRO, L. E. (2002). "Valuation of Companies in Emerging Markets: A Practical Approach", John Wiley & Sons, Inc., New York, 14-56, 104-107.
  • PEREIRO, L. E. (2006). "The practice of investment valuation in emerging markets: Evidence from Argentina", Journal of Multinational Financial Management, 16: 160-183.
  • PRATT, S.P. and GRABOWSKI, R.I. (2008). "Cost of Capital: Applications and Examples", Third Edition, John Wiley & Sons, Inc., New Jersey.
  • ROCHA, K., CAMACHO, F. and BRAGANCA, G. (2007). "Return on capital of Brazilian electricity distributors: A comparative analysis", Energy Policy, 35: 2526-2537.
  • ROSS, S.A. (1976). "The arbitrage theory of capital asset pricing", Journal of Economic Theory, December: 341-360.
  • SABAL, J. (2004). "The discount rate in emerging markets: A guide", Journal of Applied Corporate Finance, 16(2-3): 155-166.
  • SCHRAMM, R.M. and WANG, H.N. (1999). "Measuring the cost of capital in an international CAPM framework", Journal of Applied Corporate Finance, 12: 63-72.
  • SERCU, P. (2009). "International Finance: Theory into Practice ", Princeton University Press, Princeton, New Jersey, USA.
  • SHAPIRO, A.C. (2003). "Multinational Financial Management", Seventh Edition, John Wiley & Sons, Inc., New York.
  • SHARPE, W. (1964). "Capital asset prices: A theory of market equilibrium under conditions of risk", Journal of Finance September, 19(3): 425-442.
  • SOLNIK, B. (1974). "The international pricing of risk: An empirical investigation of the world capital market structure", Journal of Finance, 29: 48-54.
  • SOLNIK, B. (1977). "Testing international asset pricing: Some pessimistic views", Journal of Finance, 32: 503-511.
  • STULZ, R. (1999). "Globalization, corporate finance and the cost of capital", Journal of Applied Corporate Finance, 12: 8-25.
  • VOLL, S.P., BHATTACHARYYA, S. and JURIS, A. (1998). "Cost of Capital for Privatised Distribution Companies: A Working Paper for a Calculation for India", NERA Working Paper October, NERA, Washington, D.C., http:// www.nera.com/image/3867.pdf, 29.06.2012).
  • WATERSON, M. (1988). "Regulation of the firm and natural monopoly", Basil Blackwell Inc., New York. 1-15.
  • ZENNER, M. and AKAYDIN, E. (2002). "A practical approach to the international valuation and capital allocation puzzle", Global Corporate Finance Report July 26, SalomonSmithBarney, New York, London, http://finance. wharton.upenn.edu/~benninga/hungary/solomon2002.pdf, 20.05.2012.
There are 50 citations in total.

Details

Primary Language Turkish
Journal Section Articles
Authors

Mustafa Gözen This is me

Publication Date September 1, 2013
Published in Issue Year 2013 Volume: 5 Issue: 3

Cite

APA Gözen, M. (2013). Başlık Belirtilmemiş. Uluslararası Alanya İşletme Fakültesi Dergisi, 5(3), 63-72.
AMA Gözen M. Başlık Belirtilmemiş. Uluslararası Alanya İşletme Fakültesi Dergisi. September 2013;5(3):63-72.
Chicago Gözen, Mustafa. “Başlık Belirtilmemiş”. Uluslararası Alanya İşletme Fakültesi Dergisi 5, no. 3 (September 2013): 63-72.
EndNote Gözen M (September 1, 2013) Başlık Belirtilmemiş. Uluslararası Alanya İşletme Fakültesi Dergisi 5 3 63–72.
IEEE M. Gözen, “Başlık Belirtilmemiş”, Uluslararası Alanya İşletme Fakültesi Dergisi, vol. 5, no. 3, pp. 63–72, 2013.
ISNAD Gözen, Mustafa. “Başlık Belirtilmemiş”. Uluslararası Alanya İşletme Fakültesi Dergisi 5/3 (September 2013), 63-72.
JAMA Gözen M. Başlık Belirtilmemiş. Uluslararası Alanya İşletme Fakültesi Dergisi. 2013;5:63–72.
MLA Gözen, Mustafa. “Başlık Belirtilmemiş”. Uluslararası Alanya İşletme Fakültesi Dergisi, vol. 5, no. 3, 2013, pp. 63-72.
Vancouver Gözen M. Başlık Belirtilmemiş. Uluslararası Alanya İşletme Fakültesi Dergisi. 2013;5(3):63-72.