Philippe Foulquier, Ph.D., Director of the research centre in financial analysis and accounting, introduces the centre, the themes it works on, and its publications.
 

CONTACT

E-mail : philippe.foulquier@edhec.edu 

Tel.: +33 (0)4 93 18 34 80

 

 

 

The EDHEC Financial Analysis and Accounting Research Centre was created in 2006 around the themes of company valuation and management; featuring prominently in the context of the creation of the Centre were new accounting (IFRS, US GAAP) and new prudential rules (Solvency II and Basel III).

Today, cultural and technological changes allow multiple dynamic analyses in several areas, the cornerstone of which is the discount rate: risk is the essential element. A profound change has been underway for a decade now; the aim of the change is to improve stakeholders' views of the risks actually taken by companies. Faced with increasingly complex risks, accounting and prudential standards (IFRS, US GAAP, Solvency II, and Basel III) are undergoing a complete revision. These reforms have an impact on the management of financial or non-financial firms (enterprise risk management, economic capital models, management control, internal control, and so on).

There may be a large body of research into the determination of the discount rate in general and on risk more particularly, but the gap between academe and the business world seems to be growing wider by the day. In practice, those who do the valuations often oversimplify, invalidating their reasoning; they may even ignore theory and transform the discount rate into a black box to hide the absence of objective and academic foundations for the determination of the risk premium and of beta.

The aim of the EDHEC Financial Analysis and Accounting Research Centre is to shed new light on risk integration (the impact on management, strategy and financial communication, valuation, and discount rates) and to recommend new practical solutions of management in general as well as methods suited to the frameworks for accounting and prudential standards.

The great diversity of backgrounds is one of the advantages of the research centre (specialists in financial analysis, in corporate finance, in accounting on one hand and from academe or from business on the other), and it allows the centre to take a multi-disciplinary approach to company valuation and management: the impact of IFRS on risk valuation and risk pricing; the impact of IFRS and Solvency II on insurance company management; bank-insurance and optimal capital allocation; the financial structure of family firms and cost of capital; optimisation of steering tools (internal control, management control, enterprise risk management, market-consistent embedded value, asset/liability management, economic capital).

The EDHEC Financial Analysis and Accounting Research Centre is working on five research programmes:

  • 1. Determination of the cost of capital
  • 2. Impact of IFRS on company valuation
  • 3. Family firms, financing structure and governance
  • 4. Enterprise risk management, economic capital, management control, and internal control within the new accounting and prudential frames of reference
  • 5. Bankruptcy modelling and company valuation

  The mission of the EDHEC Financial Analysis and Accounting Research Centre is also to accompany businesses in a tailor-made implementation of the Centre's research results and thus to offer consulting and financial engineering services.

The great diversity of backgrounds is one of the advantages of the research centre (specialists in financial analysis, in accounting, in law, researchers from academe or from business), and it allows the centre to take a multi-disciplinary approach to financial analysis.

 

FOULQUIER Philippe, PhD

Professor - Director of the EDHEC Financial Analysis and Accounting Research Centre - Academic Director of MSc Financial Management in European Apprenticeship Track
Accounting, Finance

 

ARIAS Liliana

Research Engineer

 

 

BESCOS Pierre-Laurent, PhD

Associate Researcher

 

 

DÉDEREN Guillaume

Research Associate
Analyse Financière, Accounting

 

 

DU JARDIN Philippe, PhD

Professor
Information Technology

 

EL HEDI AROURI Mohammed

Professor,
University Auvergne CRCGM

 

 

KLUMPES Paul

Research Associate

 

 

LE MAISTRE Alexandre

Research Associate

 

The EDHEC Financial Analysis and Accounting Research Centre studies company valuation. Cultural and technological changes now make it possible to use multiple dynamic analyses, the cornerstone of which is the discount rate. There is an abundance of academic research into the determination of the discount rate, but the gap between academe and business seems to be growing wider by the day. In practice, those who do the valuations often oversimplify, invalidating their reasoning; they may even ignore theory and transform the discount rate into a black box to hide the absence of objective and academic foundations in the determination of the risk premium and of beta.

The objective of the EDHEC Financial Analysis and Accounting Research Centre is to call into question certain financial paradigms, in particular that which consists of separating idiosyncratic riskbecause it is diversifiablefrom the risk premium to provide the financial markets (financial analysts, investors, companies, rating agencies, auditors) with new light on the discount rate and to recommend new ways to determine it. To do so, five research programmes have been set up:

 

Determination of the cost of capital

This programme is the foundation of the Financial Analysis and Accounting Research Centre. It monitors the discount rate. Indeed, the aim of this programme is to review academic theories on the cost of capital and, in an attempt to understand the reasons for which they are not used in practice, point out the drawbacks of each. The goal is to create an EDHEC valuation model that reconciles academic and operational demands.

 

Impact of IFRS on company valuation

The ideology of the Centre is that company valuation should incorporate an operational risk premium that includes a systematic accounting risk that should be emphasised more greatly by IFRS demands for the qualification and quantification of risk. In this respect, the aim of the programme is to call into question the financial paradigm that separates idiosyncratic risk from the risk premium and thus to contradict the dogma according to which international reporting standards are neutral with respect to the perception of risk; instead, our work shows that there is an impact either on the financial aggregates analysts base their work on or on the strategy used by companies to counter the accounting effect.The first study done by this programme, entitled The Impact of IFRS and Solvency II on Asset-Liability Management and Asset Management in Insurance Companies and undertaken in conjunction with the EDHEC Risk and Asset Management Research Centre, was sponsored by AXA IM and presented at the European Parliament in Brussels as well as in Paris and London, at round tables and conferences involving insurance professionals and European regulatory authorities.

 

Corporate governance, valuation, and cost of capital

In recent years, the subject of this research programme has been a recurring theme in valuation as done by the financial community. In general, analysts operate intuitively when, in view of the quality of corporate governance, they make adjustments to the discount rate. We want to bring greater scientific rigour to this practice.The first study in this programme is sponsored by Décathlon and deals with optimising the financial structure of family companies, the cost of capital, and valuation. As it happens, the particular features of family companies invalidate many of the findings of modern financial theory, in particular with respect to the analysis of company performance, of governance systems, of financing structures, and of investment policy.

 

Management control, risk management, and company valuation

The aim of this research programme is to show how the management of risks can generate value for companies, and thus how it can have an impact on their cost of capital and their valuation. Value creation is currently assessed and steered through residual result indicators (such as economic value added) or through strategic management control tools (such as the balanced scorecard) that take the management of risks into account little or not at all.

 

Initially, this programme will focus on the definition of the concepts necessary to the implementation of a rigorous method of determining risk-adjusted capital, of value creation (depending on the return on risk-adjusted capital and the cost of capital), and of the optimisation of the allocation of own capital per business unit. Once this conceptualisation is completed, our objective is to make improvements to the tools currently available to the management controller by complementing them with risk management indicators.

The use of these indicators should be evident both in external financial communication transmitted to investors and in the internal performance management of the companies.

 

Bankruptcy modelling, cost of capital, and company valuation

The goal of this research programme is to study the conditions for the optimisation of bankruptcy prediction models, in particular through research into relevant indicators and methods of depicting the early signs of bankruptcy. These indicators and signs are an essential source of information for financial analysts and evaluators, especially when the company is believed to be in trouble.

 First, from a perspective of forecasting bankruptcy risk, the role of the methods of indicator selection in model performance is analysed, in particular the ways the greater or lesser fit of the methods and the modelling techniques can affect the accuracy of forecasts. Here, the aim is to propose means, not yet fully explored, of improving the models.

 Then, this time from a perspective of bankruptcy prevention, ways to portray the processes leading to bankruptcy will be studied; an attempt will be made to describe characteristic trajectories. Ultimately, the idea is to propose a tool for the early diagnosis of bankruptcy, a too that relies on a dynamic vision of the financial health of the company.

 Idées économiques et sociales
Academic publication
Pierre Courtioux, PhD
2017
Dans cette étude, nous proposons d’analyser l’impact de la réglementation prudentielle Solvabilité 2 sur les investissements immobiliers des...
Position paper
Liliana Arias
,
Tristan-Pierre Maury
,
Philippe Foulquier
2017
In this study, we analyse the impact of Solvency II prudential regulations on property investments made by French insurers. Real estate has...
Position paper
Liliana Arias
,
Tristan-Pierre Maury
,
Philippe Foulquier
2017
Expert Systems with Applications
Academic publication
Philippe du Jardin
2017
 We recall the principal theoretical mechanisms at work and carry out a comparative analysis with other historical episodes of quantitative...
Position paper
Liliana Arias
,
Guillaume Déderen
,
Philippe Foulquier
,
Tristan-Pierre Maury
2016
Nous rappelons les principaux mécanismes théoriques à l’oeuvre et réalisons une mise en perspective historique d’autres épisodes de Quantitative...
Position paper
Liliana Arias
,
Guillaume Dederen
,
Philippe Foulquier
,
Tristan-Pierre Maury
2016
Pour accéder à cette publication, merci de bien vouloir remplir ce formulaire
Position paper
Philippe Foulquier
,
Liliana Arias
2016
Dans le contexte actuel de baisse de la rentabilité des entreprises réduisant à due concurrence l’autofinancement, de raréfaction des ressources...
Position paper
Philippe Foulquier
,
Frederic Herbin
2015
Neurocomputing, Volume 165, Octobre 2015, pp238-254.
Academic publication
Yoan Miche
,
Anton Akusok
,
David Veganzones
,
Kaj-Mikael Bjork
,
Eric Severin
,
Philippe duJardin
,
Maite Termenon
2015
Neurocomputing, Volume 165, pp238-254, October 2015.
Academic publication
Yoan Miche
,
Anton Akusok
,
David Veganzones
,
Kaj-Mikael Bjork
,
Eric Severin
,
Philippe duJardin
,
Maite Termenon
2015
EDHEC Publication
Philippe Foulquier, PhD
,
Mohamed El Hedi Arouri
,
Alexandre Le Maistre
2014
Les débats sur la Directive Omnibus 2 sont depuis juillet 2012 dans une impasse. Les principaux points de discorde concernent l’intégration des...
EDHEC Publication
Liliana Arias
,
Mohamed El Hedi Arouri
,
Philippe Foulquier
2013
The insurance industry’s new prudential regulation will come into effect in 2014. By considering the majority of risks faced by insurance companies...
EDHEC Publication
Liliana Arias
,
Philippe Foulquier
,
Alexandre Le Maistre
2012
We analyse recent trends in both accounting and regulatory supervision after the financial crisis and identify areas where there are still...
Position paper
Paul Klumpes
,
Peter Welch
2011
En effet, l'élaboration des règles prudentielles Solvency II est devenue un sujet de préoccupation majeure pour le secteur du private equity, car la...
EDHEC Publication
Liliana Arias
,
Mohamed El Hedi Arouri
,
Philippe Foulquier
,
Stephane Gregoir
2010
The drawing-up of Solvency II prudential rules has become a matter of major concern for the private equity sector since the current measure for...
EDHEC Publication
2010
The objective of our study is to show how, by having these investments respond to objectives more inherent to the company, these Solvency II...
EDHEC Publication
Philippe Foulquier
2009
Les leaders européens de l'assurance, précurseurs dans le domaine, montrent que leur modèle de capital économique permet d'orienter leurs choix...
EDHEC Publication
Philippe Foulquier
2009
Ce call for reaction a recueilli plus de 800 réponses et constitue la première enquête internationale sur la pertinence des réformes effectuées par...
EDHEC Publication
Noel Amenc
,
Frederic Ducoulombier
,
Philippe Foulquier
2008

Pages

The Impact of Solvency II Prudential Regulation on Property Financing in the Insurance Industry

 

 

 

 

 

 

 

 

 

 

Agenda