In equity valuation they keep talking about how dividend based models are appropriate when the perspective is of the minoriity shareholder, Free cash flow models are bette4er when the perspective is of the controlling investors and so on
What do they mean by these statements? what difference does it make if perspective is different?
The DDM is assumed when the owner cannot affect the dividend policy. This is the case for minority shareholders.
The FCF models are more relevant from a controlling ownership position’s point of view, since dividend distributions do not affect FCFE. It can be used from a controlling shareholder, that’s what it means. DDM can’t, since DDM assumes fixed dividend policy (in the midterm at least)
thats alright. I know that
why is it so?
I mean these models give you a stock valuation. why different valuation models to different buckets. and if they yield different results why different value of stocks to the different investors??