The Journal of Fisheries Business Administration (수산경영론집)

The Korean Society of Fisheries Business Administration (한국수산경영학회)
권호 표지
DOI QR코드

DOI QR Code

The Estimation of Compensation for Revoking a License for Fishery Business and Appropriate Discount Rate

어업권 취소에 대한 손실보상액 추정과 이자율

  • Jung, Hyung-Chan (Division of Business Administration, Pukyong National University) ;
  • Chung, Man-Hwa (Fisheries Economic Institute / Research Fellow, National Federation of Fisheries Cooperatives)
  • 정형찬 (부경대학교 경영학부) ;
  • 정만화 (수협중앙회 수산경제연구원)
  • Received : 2013.02.11
  • Accepted : 2013.08.28
  • Published : 2013.09.30
Download PDF
⟨ Previous Next ⟩

Abstract

We investigate the appropriateness of the fixed 12% discount rate to be used in estimating the amount of compensation for revoking a license for fishery business by the Enforcement Decree of Fisheries Act in Korea. We also suggest the appropriate discount rate fully reflecting the change of market interest rate in the Korean financial market. The capital asset pricing model, or, CAPM is the best known model of risk and return, and is widely used to estimate the expected rate of return for the risky projects. Even though the CAPM implies that the discount rate or the expected rate of return should change as the related market factors do, the discount rate used to estimate compensation for revoking a license for fishery business remains to be the same 12% rate for the last 15 years by law. During this period, however, the yield to maturity for the 5-year government bonds in Korea has dramatically changed from about 12% to less than 3%. In order to provide the fair compensation for the damages against the coastal fisheries and evaluate the intrinsic value of fishery resources in the coastal areas, we suggest that the appropriate discount rate should be determined by the yield to maturity of the government bonds with 5-year maturity, instead of the current fixed 12% interest rate.

Keywords

References

  1. Brealy, R., Myers, S. and Marcus, A. (2012), Fundamentals of Corporate Finance, 12th ed., McGraw-Hill Irwin.
  2. Chang, H. B. (2000),"A Comparative Study on the Development Pattern of Fisheries Damage Compensation System between Korea and Japan," Ocean Policy Research, 15, 1-19.
  3. Choi, I. K. (2004),"A Study on the Compensation System of Fisheries Damage and Main Controversial Issues,"Proceedings of Korea-Japan Joint Seminar for Compensation Practices for Fisheries Damages, 25-40.
  4. Clayman, M. et al. (2012), Corporate Finance: A Practical Approach, Second Edition, Wiley.
  5. Fama, E. and French, K. (1993), "Common Risk Factors in the Returns on Stocks and Bonds," Journal of Financial Economics, 33, 2-56.
  6. Jung, H. C. (2000),"Derivation of a Model to Estmate Compensation for Damages in Chartered Fisheries by Using CVP Analysis,"The Journal of Fisheries Business Administration, 31, 133-153.
  7. Kahn, J. (1987),"Measuring the Economic Damages Associated with Terrestrial Pollution of Marine Ecosystem," Marine Resource Economic 4, 193-209. https://doi.org/10.1086/mre.4.3.42628994
  8. Kang, Y. J., Kim, K. S. and Ha, K. L. (1997),"A Study on the Estimation Method of Compensation for Restriction in Licensed Fisheries Caused by a Large Scale Coastal Reclamation,"The Journal of Fisheries Business Administration, 28, 71-84.
  9. Kang, Y. J., Kim, K. S., Zhang, C. I., Park, C. K. and Lee, J. S. (2004),"A New Statistical Approach for the Estimation of Range and Degree of Fisheries Damages Caused by Public Undertaking,"The Journal of Fisheries Business Administration, 35, 117-132.
  10. Kim, W. S. and Kim, K. Y. (2011),"An Empirical Study on the Cost Behavior in Coastal Fishery,"The Journal of Fisheries Business Administration, 42, 1-13.
  11. Lee, W. K. (1994),"A Study on the Legal System of Compensation for Fisheries Loss Caused by Public Works,"The Journal of Fisheries Business Administration, 25, 19-36.
  12. Lintner, J. (1965),"The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets,"The Review of Economics and Statistics, 13-37.
  13. Moon, J. G. and Kang, Y. J. (2006),"A Study on the Reform Measures for the Act on the Acquisition of Land for the Public Undertakings and Compensation: Focused on the Case of Harbor Construction,"The Journal of Fisheries Business Administration, 37, 85-108.
  14. Mossin, J. (1966),"Equilibrium in a Capital Asset Market,"Econometrica, 34, 768-783. https://doi.org/10.2307/1910098
  15. Pyo, H. D. (1994), "An Economic Approach to Compensation Practices for Fisheries Damages of Korea," The Journal of Fisheries Business Administration, 25, 1-18.
  16. Sharpe, W. (1964), "Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk," Journal of Finance, 19, 425-442.