P/E and P/B multiples and company’s financial structure

Dragos Minjina ()
Additional contact information
Dragos Minjina: Faculty of Insurance, Finance, Banking and Stock Exchanges, Academy of Economic Studies, Bucharest

Analele Stiintifice ale Universitatii "Alexandru Ioan Cuza" din Iasi - Stiinte Economice (1954-2015), 2008, vol. 55, 103-110

Abstract: Multiples play an important role in valuation. P/E and P/B multiples are in negative relation with the cost of equity, which in turn is influenced by risk and interest rate. The P/E multiple is mainly driven by future earnings growth, whereas the major drivers of the P/B multiple are future return on common equity (ROCE) and growth in book value of equity. For P/E multiple is also important the return on invested capital (ROIC). In the real world, financing decisions lead to the modification of both equity valuation multiples and entity valuation multiples. In spite of the fact that the former multiples category is theoretically more affected, the empirical studies reveal a greater performance of the valuations based on these multiples. The relation between market-to-book ratio and leverage ratio is not monotonic and is positive for most firms.

Keywords: multiple; P/E; P/B; financial structure; equity valuation (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://anale.feaa.uaic.ro/anale/resurse/012_F10_Minjina.pdf (application/pdf)
http://anale.feaa.uaic.ro/anale/ro/Arhiva%202008%20-%20Minjina/218 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aic:journl:y:2008:v:55:p:103-110

Access Statistics for this article

More articles in Analele Stiintifice ale Universitatii "Alexandru Ioan Cuza" din Iasi - Stiinte Economice (1954-2015) from Alexandru Ioan Cuza University, Faculty of Economics and Business Administration Contact information at EDIRC.
Bibliographic data for series maintained by Sireteanu Napoleon-Alexandru ().