Accounting mechanism for information signals about the imposition of sanctions in valuation of a company sanctions

intrinsic stock value estimation Investors have to review regularly their forecasts and stock value estimates taking into consideration the imposition of sanctions against Russian companies. Due to the presence of behavioral effects, as well as to the incorrect accounting of incoming information, the risk of obtaining inaccurate stock value estimates increases. In this regard, a mechanism should be developed for adequate update of stock value estimates upon receipt of new information signals about the imposition of sanctions.

Accounting mechanism for information signals about the imposition of sanctions in valuation of a company sanctions; stock value estimates; intrinsic stock value estimation Investors have to review regularly their forecasts and stock value estimates taking into consideration the imposition of sanctions against Russian companies. Due to the presence of behavioral effects, as well as to the incorrect accounting of incoming information, the risk of obtaining inaccurate stock value estimates increases. In this regard, a mechanism should be developed for adequate update of stock value estimates upon receipt of new information signals about the imposition of sanctions.
The study is based on such methods as analysis, synthesis, the longitudinal method, as well as the method of discounted cash flows. The study is based on the dynamics of financial indicators of stock returns of the 40 most marketable Russian companies.
A mechanism is proposed for accounting the informational signals about sanctions, which makes it possible to avoid behavioral effects and update adequately the intrinsic stock value estimates upon receipt of new information on the imposition of sanctions.
This mechanism makes it possible to consider both changes in expectations regarding cash flows and changes in the cost of capital for companies. At the same time, the research in this field should be continued in order to develop a methodology for equity capital valuation adjustment that will be instrumental in consideration of variance in bias and emergence of the so-called "thick tails" in the distribution of stock returns under receipt of information signals on the imposition of sanctions.

Introduction
U pon receipt of official information or rumors about sanctions, it is required to revise the estimates of the intrinsic value of companies. The lack of a holistic accounting mechanism for the impact of sanctions on a company's value can lead to negative consequences such as demonstration of behavioral effects by investors and analysts. In this regard, the present study is concerned with the development of an accounting mechanism for information signals on the introduction of sanctions in stock value estimation.

Materials and methods
The impact of sanctions on the economic environment, the activities of companies and the capital market conditions has been studied in a number of articles [1][2][3][4][5][6]. A study conducted by Hoffman and Neuenkirch [7] revealed that during the periods of particular tension in the Ukrainian conflict, the Russian stock market became more volatile by 6.5%, compared with the usual state (for comparison, the volatility of the Ukrainian stock market increased approximately by 8.7% on average). Kholodilin et al. [8] indicate that the impact of sanctions on the stock market is negligible, compared with the dynamics of the stock market over the past 10 years.
Despite the existence of conventional methods for valuation of a business based on a discounted cash flow model [9], in the authors' opinion, there is a need to develop an accounting mechanism for information signals on the imposition of sanctions, which can be used during the renewal of the intrinsic stock value estimates.
This study was conducted on the basis of data on Russian public companies for 2012-2017.
The sampling included 40 Russian public companies grouped in 10 industries. Sanctions were imposed on 11 companies included the presented sampling [10], the rumors about the imposition of sanctions regarded 10 companies (but no sanctions were imposed). No sanctions were expected or imposed on the remaining 19 companies.

Results
In accordance with the discounted cash flow model, the intrinsic value of a financial asset depends on expected cash flows and risks, the value of which reflects the capital value.
Either expected cash flows related to shareholders (for example, free cash flow for shareholders or dividends) or expected cash flows for all shareholders (for example, free cash flow for a firm) are used for the purposes of stock value estimation. In both cases, cash flow can be influenced by general economic factors (in particular, GDP growth rate, real disposable household income), and industry factors (e.g., market volume growth rate), as well as the factors related to the company (expected market share, revenue growth rate, sales margins, capital investments, opportunities for debt acquisition). If information signals on the imposition of sanctions lead to a change in investors' expectations regarding any of these factors, then the assessment of the company's internal value should also change.
Likewise, a change in investors' expectations regarding any of the components of the capital value will result in a change in the company's intrinsic value. Practically, in the process of stock value estimation, either the weighted-average cost of capital or the equity value is used.
The value of the weighted-average cost of capital depends on the debt load of the company, the marginal income tax rate, the cost of debt financing and the equity value. In accordance with the CAPM model, the equity value depends on the risk-free interest rate, the value of the market risk premium, and the company's beta coefficient.
Thus, the emergence of information signals affects the value of companies by influencing the following determinants of value:  Table 1).

Discussion
In accordance with the discounted cash flow model, the intrinsic value of a financial asset depends on the expected cash flows and risks, the value of which reflects the capital value.
Either expected cash flows related to shareholders (for example, free cash flow for shareholders or dividends) or expected cash flows for all shareholders (for example, free cash flow for a firm) are used for the purposes of stock value estimation. In both cases, cash flow can be influenced by general economic factors (in particular, GDP growth rate, real disposable household income) and industry factors (e.g., market volume growth rate), as well as the factors related to the company (expected market share, revenue growth rate, sales margins, capital investments, opportunities for debt acquisition). If information signals on the imposition of sanctions lead to a change in investors' expectations regarding any of these factors, then the assessment of the company's internal value should also change.
Likewise, a change in investors' expectations regarding any of the components of the capital value will result in a change in the company's intrinsic value. Practically, in the process of stock value estimation, either the weighted-average cost of capital or the equity value is used. The value of the weighted-average cost of capital depends on the debt load of the company, the marginal income tax rate, the cost of debt financing [12] and the equity value. In accordance with the CAPM model, the equity value depends on the risk-free interest rate, the value of the market risk premium, the company's beta coefficient and debt burden [13].
Companies against which targeted sanctions were not imposed may also be negatively affected by the fact that sanctions may be of a sectoral nature or reduce economic activity in general. The accounting mechanism for information signals on the imposition of sanctions can also be applied to such companies, since it allows reviewing the indicators common to the capital market (risk-free rate, market risk premium), considering the change in the beta coefficient, and also updating the expectation regarding the cash flows of companies.

Conclusion
When the news background is filled with information about the imposition of sanctions, investors and analysts are especially likely to demonstrate behavioral effects. In this regard, it is required to adhere to a predetermined mechanism for estimates renewal. This will make it possible to give more accurate estimates than average market ones, since under the conditions of such a news background, the hypothesis of market efficiency in a semi-strong setting may be fulfilled [14], according to which: "if any information is immediately and completely reflected in the price of the asset, then the market, in which this asset is traded, can be called effective."