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A holistic concept for the sustainable evaluation of company shares

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  • Gunnar Prause

    (Tallinn University of Technology, Estonia)

Abstract

Concerning the financial shares there exist a huge variety of approaches in literature. The majority of the existing concepts for the evaluation of company shares focus on financial aspects by stressing the model of present net value or of Black – Scholes in order to approximate the “financial value” of the equity to be able to calculate a fair participation of the shareholder on the company profit. The “political value” of a share, i.e. evaluation of the voting power related to a company shares, represents a rather neglected topic. An important reason for that situation is related to the fact that the voting power of shares is considered rather as a question for the SME sector than for bigger companies. In practical business life formalized methods based on correction tables are used to include the voting power into the evaluation of company shares. These approaches are rather based on historic transactions than on an analytical concept and they do not take under account the specific situation in companies. The paper will discuss a holistic approach for the evaluation of company shares based on mathematical game theory in order to develop sustainable model for integral evaluation of the “political” value and the “financial” value of company shares. The results of the mathematical approach will then be compared with the most often used methods for the evaluation of voting power of shares in business life in order to give recommendations for more realistic and fairer evaluation methods.

Suggested Citation

  • Gunnar Prause, 2014. "A holistic concept for the sustainable evaluation of company shares," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 2(1), pages 37-42, September.
    • Handle: RePEc:ssi:jouesi:v:2:y:2014:i:1:p:37-42
    DOI: 10.9770/jesi.2014.2.1(5)
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    References listed on IDEAS

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    1. Lukas Girūnas & Jonas Mackevičius, 2014. "Evaluation of frauds in public sector," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 1(3), pages 143-150, March.
    2. Dan S. Felsenthal & Moshé Machover, 1998. "The Measurement of Voting Power," Books, Edward Elgar Publishing, number 1489.
    3. Mindaugas Laužikas & Antanas Krasauskas, 2013. "Impacts of sustainable structural growth on the economic performance of listed companies," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 1(2), pages 81-91, December.
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    Cited by:

    1. Stefano Barberis & Lorenzo Di Fresco & Vincenzo Alessandro Santamaria & Alberto Traverso, 2014. "Sustainable entrepreneurship via energy saving: energy harvester exploiting seebeck effect in traditional domestic boiler," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 2(2), pages 86-97, December.

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    More about this item

    Keywords

    evaluation of companies; voting power; game theory; mathematical models for economic problems;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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