The Research On The Valuation Of Diversified Firms

Within the context of economic globalization and rapid growth of capital market, corporations as profit-driven organizations have to constantly improve their operating activities and expand their depth and width. Therefore, diversified operation becomes ultimate direction for more large corporations, group corporations and multi-national corporations. Traditional valuation methods no longer fit the diversified corporation because of their characters. New model need to be constructed to evaluate the diversified firms appropriately.This article defines the diversified firms as the firms which operate at least two kind of business that have different economic nature at the same time. The diversified firms’ diversified operation and future development always rely on their core business. Using the data of listed corporations from 2012 to 2014, this article analyses the current situation of the diversified firms of China. The number of them keeps increasing in the three years. The diversified firms take the 61.38 percent of all the listed corporations at the end of 2014. This article analyses the current valuation methods of diversified firms and discusses the existing problems, and analyses the factors affecting the value of diversified firms from macro level and micro level. Then the article also describes the theory and methods of such firms, and draws the conclusion that the intrinsic value theory and income approach are more applicable. Then article put forward the new train of valuation thoughts and emphasis that the analysis of business structure and development trend should be based on the analysis of the corporations’ situation. Under the guidance of that, the article constructs a new valuation model of diversified firms, which evaluates the firms on the basis of each individual business by using their own development trends and risk, and then taking the weighted average. The case analysis selects Ping An Group, which operates the business of insurance, banking and investment. Evaluate Ping An Group by the new model and compare the value with the market value on valuation day. The comparison result shows that the value is in the receivable range. Therefore, it proves the new thoughts and the new model are reasonable and feasible.