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A risk-adequate valuation of Brazilian companies using the example of Arezzo Indústria e Comércio S.A

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  • Wüstermann, Ralf Peter

    () (PhD.-Student an der Girne American University)

Abstract

Whether and to what extent an investor conducts a direct investment depends inter alia on how much the investor assesses the risk of a direct investment. This article examines the risk-adequate valuation of foreign equity investments. Foreign equity investments can be calculat-ed with an investment calculating procedure; however, the final decision regarding the foreign shareholding depends on the investor’s subjective risk assessment. This subjective risk as-sessment may lead to a determination that the investment risk is overvalued or undervalued. Therefore, it is possible that the investor loses opportunities or mistakenly invests. Hence, we will present different objectives and risk-adequate methods to value companies. The risk as-sessment can be performed using previously existing credit rating agencies and insurance company risk assessments, or it can be performed using the theory of international parity rela-tions. This new method is used to evaluate foreign companies. Also it is possible to simulate changes in a foreign equity investment over a long period and using scenarios. This will be performed using the fashion group Arezzo Indústria e Comércio SA in Brazil as the example. The acquired knowledge allows the investor to make an objective and risk-adequate assess-ment of foreign equity investments.

Suggested Citation

  • Wüstermann, Ralf Peter, 2015. "A risk-adequate valuation of Brazilian companies using the example of Arezzo Indústria e Comércio S.A," Zeitschrift für interdisziplinäre ökonomische Forschung, Allensbach Hochschule, issue 2, pages 30-39, Dezember.
  • Handle: RePEc:ris:zfioef:0052
    as

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    More about this item

    Keywords

    Risk; Brazilian companies; valuation; investment; risk-adequate valuation;

    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F30 - International Economics - - International Finance - - - General
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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