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Investment Attractiveness and Sustainable Growth of Telecommunication Companies: Value-Oriented Approach

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  • Irina Matyash

    (Altai State University)

Abstract

The growing complexity and uncertainty of economic processes in the digital economy require an increase in the accuracy of the company’s performance. This explains the interest in the development of the methods of value-based management (VBM). The development of the digital economy is accompanied by an increase of the update requirements of products and technologies. This makes it necessary to assess the profit potential of companies as an internal source of capital accumulation funds and as the base for investment attractiveness of projects. I consider how to refine the method of economic value added taking into account the market rate of profit reinvestment. For an integrated assessment of the factors of the capital present value and the factors capital reinvestment, I propose an indicator of the systemic value added (profitability added) of a company. Accelerated profit shifting through dividends reflects how business owners assess their business risks as well as characterizes the possibilities for modernization in the conditions of restricted external financing. Therefore, that is of interest to estimate the investment attractiveness of companies. The proposed approach allows assessing sustainable growth prospects taking into account the balance of the interests of strategic stakeholders in the development of the policy for the profit distribution. The proposed approach was applied for the study of four Russian companies in the telecommunications industry in 2015–2016. Analysing the companies’ financial statements, I show that the analysis of the factors of economic value added specifies the assessment of the economic potential of a business. I propose to classify four levels of sustainable growth depending on the accepted strategy of net profit distribution in a company. The table of equity management strategies has resulted from the analysis. I have determined the indicators that allow monitoring the dynamics of the risk of investing in a company. The proposed approach specifies criteria for the fundamental analysis of issuing companies, expands the possibilities for the assessment and forecast of investment attractiveness of shares and debt instruments of companies.

Suggested Citation

  • Irina Matyash, 2018. "Investment Attractiveness and Sustainable Growth of Telecommunication Companies: Value-Oriented Approach," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(4), pages 1411-1423.
  • Handle: RePEc:ura:ecregj:v:1:y:2018:i:4:p:1411-1423
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    References listed on IDEAS

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    1. Magni, Carlo Alberto, 2009. "Splitting up value: A critical review of residual income theories," European Journal of Operational Research, Elsevier, vol. 198(1), pages 1-22, October.
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    3. Fernandez, Pablo, 2002. "Valuation Methods and Shareholder Value Creation," Elsevier Monographs, Elsevier, edition 1, number 9780122538414.
    4. Fernández , Pablo, 2002. "Valuing companies by cash flow discounting: Ten methods and nine theories," IESE Research Papers D/451, IESE Business School.
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    Cited by:

    1. Shuaitao Jiao & Qiubi Sun, 2021. "Digital Economic Development and Its Impact on Econimic Growth in China: Research Based on the Prespective of Sustainability," Sustainability, MDPI, vol. 13(18), pages 1-19, September.

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    More about this item

    Keywords

    corporate finance; firm value; value-oriented approach; value-added; stakeholders; reinvestment; dividend policy; dividend yield; sustainable growth of the company; investment attractiveness;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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