Developing a Paradigm for Fair Valuation in Tehran Stock Exchange

Abstract

The concept of value is of great importance for investors. The goal of different groups of investors is always to maximize the value of their capital. The aim of this research is developing factors effective on securities in capital market in order to develop a paradigm for fair valuation that leads investors to make better decisions. To study fair value in a precise and comprehensive way, effective variables are divided into three main categories. First: evaluation variables including cash flow (income quality), discount rate, and earnings per share; second: intra-organizational variables of corporate governance including the type of ownership (the number of institutional investors), management quality (the number of boards in charge or centralized management as well as the number of non-in charge board of directors or decentralized management), the amount of reward, compensation and quality of organizational structure; third: variables relating to reporting quality such as offering reliable and on time information. Other variables such as firm size and operation cycle (complexity of business environment) have also been studied. And according to selected sample, methods and statistical analysis, a paradigm for fair valuation has been developed.