Investment Evaluation Methods and Required Rate of Return in Finnish Publicly Listed Companies

Eva Liljeblom, Mika Vaihekoski

Forskningsoutput: TidskriftsbidragArtikelVetenskapligPeer review

Sammanfattning

Financial literature advocates the use of the Net Present Value method for the evaluation of investments. Its key parameter is the required rate of return on equity, which is to be calculated using the Capital Asset Pricing Model or a similar model especially if the company is publicly listed. However,there is ample evidence on companies not necessarily utilizing the NPV method or the CAPM in their capital budgeting and investment evaluation processes. This paper presents results of a survey conducted among the companies listed on the Helsinki Stock Exchange. The results show that the Finnish companies still lag behind US and Swedish companies in their use of the NPV, and the IRR method,even though it has become more commonly used during the last ten years. CAPM is used in surprisingly few companies, and 27 percent of the companies have not even defined their required rate of return on equity.
OriginalspråkEngelska
Referentgranskad vetenskaplig tidskriftFinnish Journal of Business Economics
Volym2004
Utgåva1
Sidor (från-till)9-24
Antal sidor16
ISSN0024-3469
StatusPublicerad - 2004
MoE-publikationstypA1 Originalartikel i en vetenskaplig tidskrift

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