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№ 2019/3

Economy under the conditions of modern transformations


1Institute for Economics and Forecasting, NAS of Ukraine

Estimating risk exposure of Ukrainian enterprises using methods of corporate finance

Ekon. prognozuvannâ 2019; 3:40-59https://doi.org/10.15407/eip2019.03.040


Weak market infrastructure makes the data provided by Ukrainian stock exchanges obscure and unreliable, which ultimately led to a loss of Ukraine's "frontier market" status since 2015. This, in turn, makes risk exposure estimation of Ukrainian enterprises, especially using CAPM and its modifications, a rather complex and creative process, which is highly dependent on the qualification of the expert making such assessment. The aims of this research are to itemize the main issues with calculating beta-coefficient using Ukrainian data and to offer possible ways of mitigating or avoiding them.
Using a set of Ukrainian engineering enterprises the author demonstrates the main limitations of the current statistics provided by Ukrainian stock exchange (namely, fragmentary data with dubious representativeness), gives a condensed characterization of reasons for such state of affairs, and proposes to use methods of calculation based on open source corporate data instead. The best results were achieved by using a method based on adjusting existing average industry-based beta coefficient to enterprise's individual financial leverage. The author hypothesizes that in order to receive results more representative for Ukraine's situation one should use industry average beta, calculated based on Ukrainian data instead of worldwide averages, available in the open sources.
The methodical approaches to calculating beta coefficient, examined in this paper, and their modifications in order to fit Ukrainian conditions better, could potentially be used in order to access risk exposure of enterprises, functioning on other frontier or developing markets. Creating an open database of industry-based average betas, calculated on basis of Ukrainian data, could be a valuable alternative to currently available sources for evaluating assets on non-developed markets.

Keywords: CAPM, beta-coefficient, frontier market; stock price; ROE

JEL: C18, C81, G12

Article in Ukrainian (pp. 40 - 59) DownloadDownloads :213