Combined MCDM techniques for exploring company value based on Modigliani–Miller theorem

This study combines decision making trial and evaluation laboratory (DEMATEL), analytical network process (ANP), and VIKOR to discuss the influence relationship between and relative weights of the major factors influencing company value – cash flow, weighted average cost of capital (WACC), and tax shield and their sub-factors based on the Modigliani–Miller (MM) theorem. The purpose of this study is to offer a reference to investors and regulatory units on how to choose the most valuable company as well as utilize a more accurate financial econometrics model to support their decisions. The factors and sub-factors are identified through the research model proposed by this study and the 3 factors of MM are then expanded into a seven-factor model. Among the seven factors, a study on company value shows that scale of debt is the most important criterion compared to all other criteria, followed by cost of debt, and earnings before interest and tax (EBIT). Moreover, empirical findings demonstrate that among the leading companies of Taiwan, Japan and Korea’s panel sector, the investment value of Samsung Electronics is significantly higher than LG, AU Optronics (AUO), Innolux, and Sharp. Research results further indicate that decomposing the MM model into a more precise financial econometrics model can help investors make better stock investment decisions.

Research highlights
► This study combines decision making trial and evaluation laboratory (DEMATEL), analytical network process (ANP), and VIKOR to discuss the influence relationship between and relative weights of the major factors influencing company value.
► The research model proposed by this study and the 3 factors of MM are then expanded into a seven-factor model.
► Among the seven factors, a study on company value shows that scale of debt is the most important criterion compared to all other criteria, followed by cost of debt, and earnings before interest and tax (EBIT).
► Empirical findings demonstrate that among the leading companies of Taiwan, Japan and Korea’s panel sector, the investment value of Samsung Electronics is significantly higher than LG, AU Optronics (AUO), Innolux, and Sharp.
► Research results further indicate that decomposing the MM model into a more precise financial econometrics model can help investors make better stock investment decisions.