Degree Name

Master of Commerce - Research


School of Accounting and Finance


In a rapidly global developing economy today, the world economy and culture are becoming increasingly interconnected (Lippitt, Mastracchio & Lewis, 2008). However, the business valuation process has been changing at the pace that is even more accelerated than the pace of change in the world’s economy (Hitchner, 2006). Therefore, there is an ever-increasing demand for business valuation services pertaining to ownership interests and assets in non-public companies and subsidiaries, divisions, or segments of public companies (Hitchner, 2006). Business valuation is a process and a set of procedures used to estimate the economic value of an owner’s interest in a business (Soshnick, 2008). Valuation is used by financial market participants to determine the price they are willing to pay or receive to consummate a sale of a business (Soshnick, 2008).

The purpose of this thesis is to explore the efficiency of business evaluation methods in the Australian energy industry during the periods from 1989 to 2007. The seven commonly used business evaluation methods (CAPM, WACC, EVA, P/E ratio, DCF, MetaCapitalism and Merger and Acquisition) have been selected and compared with the share price in the whole market, listed market and delisted market to explore which valuation methods are better for evaluating business performance in the Australian energy sector for the long term.

In order to fulfill this purpose, a quantitative research project was conducted where the primary data was collected from FinAnalysis1 that listed a 19-year history of detailed financial information for all companies listed on ASX on a yearly basis from 1989 to 2007. The sample period spans 19 years from 1989 to 2007. There are 177 existing listed companies and 23 delisted companies in the sample, with different number of participating years. All the firms belong to the Australian energy industry. In addition, linear regression and t-tests were conducted to establish the strength of the link between the business evaluation methods and stock returns.

In conclusion, the results indicate that CAPM is a much better method for listed companies to measure the rate of return of an asset in a well-diversified portfolio in the Australian energy industry, and DCF is a better method for the whole of listed and delisted companies, to make capital budgeting decisions for public companies in the Australian energy sector.



Unless otherwise indicated, the views expressed in this thesis are those of the author and do not necessarily represent the views of the University of Wollongong.