Ernst & Young Roundtable on Corporate Portfolio Management
Panelists: Robert Bruner, Robert Pozen, Anne Madden, Aileen Stockburger, Forbes Alexander, Steve Munger, and Don Chew. Moderated by Jeff Greene.
A panel of experts discusses best practices in corporate portfolio management, the roles of boards and business unit leaders, barriers to successful implementation, and disclosure policy. They suggest that companies establish an independent “SWAT team” to support portfolio management, that boards become more active in reviewing the portfolio, and that line managers be measured and incented to think like owners.

Liquidity, the Value of the Firm, and Corporate Finance
Yakov Amihud and Haim Mendelson
The authors argue that liquidity is an important factor affecting a company's value. They review the evidence showing that differences—and changes—in liquidity can have major effects on the pricing of corporate stocks and bonds or, equivalently, on investors' required returns for holding them. They also suggest that the liquidity of a company's securities can be managed by corporate policies and actions.

Real Asset Valuation: A Back-to-Basics Approach
David Laughton, Raul Guerrero, and Donald Lessard
Different valuation methods can lead to different corporate investment decisions, and the conventional “static, single discount rate” DCF approach in particular is biased against the decisions that corporate managers view as “strategic.” The authors propose two separate tools, market-based valuation and complete decision tree analysis, to improve valuation and reduce biases. A case study of carbon capture illustrates the method.

Expected Inflation and the Constant-Growth Valuation Model
Michael Bradley and Gregg Jarrell
In the presence of inflation, the standard Constant-Growth valuation model seriously understates the true value of the firm when a company either (1) makes no net new investments or (2) invests only in zero Net Present Value projects. The authors provide an adjustment factor that corrects this deficiency to the Weighted Average Cost of Capital “WACC”.

Single vs. Multiple Discount Rates: How to Limit “Influence Costs” in the Capital Allocation Process
John Martin and Sheridan Titman
This article proposes a practical method for calculating the cost of capital that produces different discount rates for investment projects with different risks while minimizing the “influence costs” that arise when managers have discretion in the choice of discount rates. The proposed approach makes use of market information, thereby limiting managerial discretion.

The Era of Cross-Border M&A
Marc Zenner, Matt Matthews, Jeff Marks, and Nishant Mago
Amid current market turbulence is a quickly changing global M&A landscape that offers long-term opportunities to deliver shareholder value. The authors suggest U.S. multinationals look overseas for well-positioned targets, especially in emerging markets, by using their financial flexibility. For European and developing economy multinationals the time may be right to consider transformational cross-border “megadeals.”

Transfer Pricing for Corporate Treasury in the Multinational Enterprise
Stephen L. Curtis
This article focuses on transfer pricing, which is becoming increasingly important to multinational enterprises “MNE”. Whenever a payment crosses borders in a treasury context a transfer pricing issue is present. The case is made that an integrated, multi-functional approach to MNE treasury planning in the context of transfer pricing can be an important component in improving the efficiency of cross-border financial management.

The Equity Market Risk Premium and Valuation of Overseas Investments
Luc Soenen and Robert Johnson
The authors suggest using the U.S.-based equity market risk premium for countries that are reasonably well integrated into global capital markets. But when valuing investments in emerging markets, they recommend use of the Capital Asset Pricing Model adjusted for political risk and a measure of co-movement between the foreign and U.S. stock markets.

Stock Option Expensing: The Role of Corporate Governance
Sanjay Deshmukh, Keith Howe, and Carl Luft
The authors found that companies that provide more disclosure and appeared to have a stronger alignment of managerial and shareholder interests were also more likely to expense stock options—indirect evidence of effective corporate governance. The heaviest users of options were least likely to expense them, possibly to preserve access to capital markets.

Real Options Valuation: A Case Study of an E-commerce Company
Rocío Sáenz-Diez, Ricardo Gimeno, and Carlos de Abajo
This paper presents a real options valuation model that introduces a risk neutral adjustment that allows us to work with all the simulated paths. When applied to a real e-commerce company, the expanded present value was higher than the traditional present value, partly due to “convexity” between the value of each year's cash flow and the uncertain variables; and the values of several real options were non-additive.