Potential dividends versus actual cash flows in firm valuation

Carlo Alberto Magni and Ignacio Velez-Pareja ()

No 5516, Proyecciones Financieras y Valoración from Master Consultores

Abstract: Practitioners and some academics use potential dividends rather than actual payments toshareholders for valuing a firm´s equity. We underline the differences between the two methods and present some arguments supporting the thesis that firm valuation with potential dividends overstate the actual value of the firm´s equity. In particular, consistently with DeAngelo and DeAngelo (2006, 2007), we underline that cash flows create value for shareholders only if they are withdrawn from the firm, and that the use of potential dividends may lead to contradictions.

Keywords: Cash flows; cash flow to equity; liquid assets; potential dividends; firm valuation; equity value; miller and modigliani (search for similar items in EconPapers)
JEL-codes: G12 G30 G31 M21 M40 M41 (search for similar items in EconPapers)
Pages: 24
Date: 2009-05-11
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://ssrn.com/abstract=1374070

Related works:
Working Paper: Potential dividends versus actual cash flows in firm valuation (2009)
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:col:000463:005516

Access Statistics for this paper

More papers in Proyecciones Financieras y Valoración from Master Consultores
Bibliographic data for series maintained by Ignacio Velez ().