π-Economy (Feb 2022)
Choosing an effective way to use assets in the corporate governance system
Abstract
The relevance of the topic is confirmed by the interest of the owners in increasing the value of the enterprise by means of the most effective way of using its assets. A review of the sources on the research topic confirmed its relevance and showed that in order to improve the work with assets in the corporate governance system, it is necessary to provide arguments for the mandatory application of the highest and best use (HBU) principle when evaluating assets and businesses and to develop recommendations for evaluating the basic components of the analysis, offering a single algorithm for selecting HBU assets of the enterprise. The purpose of the study is to improve the methodological tools for choosing the most effective use of enterprise assets in the corporate governance system, ensuring the detail and validity of the analysis results. The analysis employs general scientific methods of comparative analysis of modern economic and mathematical models and methods of choosing the most effective option for using the assets of an enterprise, systematization of data and generalization of domestic and foreign experience in the field of enterprise value management concepts and company changes. The principle of choosing the HBU and its application in practice is disclosed, the argumentation of the mandatory application of this principle when assessing the assets of an enterprise is given. Recommendations on the evaluation of the basic components of the analysis is developed and the effectiveness of the application of these methods in practice is evaluated. Despite the complexity of the methods of discounting cash flows, the paper shows that the results of a carefully conducted analysis of the choice of alternative options for the use of assets are applicable to the final approval of the evaluation results determined by standard approaches. The paper shows that when choosing the most effective option for using investment assets, it is necessary to determine the optimal number of floors for legally permitted and physically possible options, justify in detail the cash flows, their change, and the rate of return on capital, take into account the uncertainty of the initial data and estimate the relative error of the expected value. When evaluating a business, choosing an effective option, special attention should be paid to the possibilities of optimizing cash flows and the use of non-core real estate. The analysis carried out in order to choose the most effective option for using the assets of the enterprise should induce an increase in the value of the assets of the enterprise at acceptable risks for the investor.
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