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Valuation of Unlisted Direct Investment Equity

Author

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  • Thomas Elkjaer
  • Jannick Damgaard
  • Emmanuel O. Kumah

Abstract

This paper analyzes the seven valuation methods for unlisted direct investment equity included in the recently adopted IMF Balance of Payments and International Investment Position Manual, Sixth Edition (BPM6). Based on publicly available Danish data, we test the three methods that are generally applicable and find that the choice of valuation method and estimation technique can have a highly significant impact on the international investment position, pointing to the need for further harmonization. The results show that the price-to-book value method generates more robust market value estimates than the price-to-earnings method. This finding suggests that the valuation basis for the forthcoming Coordinated Direct Investment Survey - own funds at book value -will provide useful information for compiling the international investment position.

Suggested Citation

  • Thomas Elkjaer & Jannick Damgaard & Emmanuel O. Kumah, 2009. "Valuation of Unlisted Direct Investment Equity," IMF Working Papers 2009/242, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2009/242
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    Citations

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    Cited by:

    1. Konrad Sobanski, 2015. "Valuation Effect As A Determinant Of The International Investment Position In Central And Eastern European Economies," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 10(3), pages 151-164, September.
    2. Gourinchas, Pierre-Olivier & Rey, Hélène & Truempler, Kai, 2012. "The financial crisis and the geography of wealth transfers," Journal of International Economics, Elsevier, vol. 88(2), pages 266-283.
    3. Jannick Damgaard & Thomas Elkjaer, 2014. "Foreign Direct Investment and the External Wealth of Nations: How Important Is Valuation?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(2), pages 245-260, June.

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