CAPM-Based Company (Mis)valuations

• 成果类型: Article
• 署名作者: Dessaint, Olivier; Olivier, Jacques; Otto, Clemens A.; Thesmar, David
• 署名单位: University of Toronto; Hautes Etudes Commerciales (HEC) Paris; Singapore Management University; Massachusetts Institute of Technology (MIT); Center for Economic & Policy Research (CEPR)
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhaa049
• 发表日期: 2021
• 页码: 1
• 关键词: TAKEOVER TARGETS; fire sales; INVESTMENT; prices; cost; equilibrium; incentives; valuation; purchases; returns

摘要

There is a discrepancy between CAPM-implied and realized returns. Using the CAPM in capital budgeting-as recommended in textbooks-should thus have real effects. For instance, low beta projects should be valued more by CAPM users than by the market. We test this hypothesis using M&A data and show that bids for low-beta private targets entail lower bidder returns. We provide further support by testing several ancillary predictions. Our analyses suggest that using the CAPM when valuing targets leads to valuation errors (relative to the market's view) corresponding on average to 12% to 33% of the deal values.