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The Market approach to comparable company valuation

Author: Meitner, Matthias Series: ZEW economic studies ; 35 Publisher: Physica-Verlag, 2006.Language: EnglishDescription: 241 p. ; 24 cm.ISBN: 3790817228Type of document: BookBibliography/Index: Includes bibliographical references
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Item type Current location Collection Call number Status Date due Barcode Item holds
Book Europe Campus
Main Collection
Print HG4028 .V3 M45 2006
(Browse shelf)
001175524
Available 001175524
Total holds: 0

Includes bibliographical references

Digitized

The Market Approach to Comparable Company Valuation Table of Contents 1 Introduction........................................................................................................... 1 1.1 Motivation................................................................................................. 1 1.2 Research Aims............................................................................................... 3 1.3 Reading Guide................................................................................................4 2 Foundations of Comparable Company Valuation............................................. 7 2.1 Definitions and Scope.................................................................................... 7 2.2 Comparable Company Valuation Within the Business Valuation Framework...................................................................................................9 2.2.1 Value Theories................................................................................... 9 2.2.2 Value Versus Price............................................................................... 13 2.2.3 Approaches to Company Valuation...................................................... 18 2.2.4 Purposes of Appraisal........................................................................... 25 2.2.5 Classification of Comparable Company Valuation.............................. 27 2.3 Rationale and Style of Comparable Company Valuation............................. 30 2.3.1 Immediate Valuation Models............................................................... 30 2.3.2 Single-Factor Valuation Models........................................................... 32 2.3.3 Multi-Factor Valuation Models............................................................ 34 2.4 Special Tasks in Comparable Company Valuation....................................... 35 2.4.1 Quality of Accounting Variables..................................................... 35 2.4.2 Aggregating the Peer Group Results.................................................... 38 2.4.3 Premiums and Discounts...................................................................... 42 3 Interrelation of Comparable Company Selection and Valuation Model Choice..................................................................................................... 47 3.1 Determinants of Comparable Company Selection........................................ 49 3.1.1 Degree of Similarity of the Peer Group Companies.............................49 3.1.2 Degree of Market Efficiency and Pricing Quality................................55 3.1.3 Consequences for Comparable Company Valuation with Special Regard to the Peer Group Selection.....................................68 3.1.4 Implications for the Choice of the Valuation Model............................ 71 3.2 Determinants of Valuation Model Choice.....................................................73 3.2.1 Value Relevance of the Reference Variables....................................... 73 3.2.2 Future Similarity Between the Target Company and Comparable Companies.................................................................... 91 3.2.3 Technical Limitations of Valuation Models......................................... 93 X Table of Contents 3.2.4 Consequences for Comparable Company Valuation with Special Regard to the Choice of the Valuation Model..................... 96 3.2.5 Implications for the Selection of Comparable Companies................... 98 3.3 Comparable Company Valuation as an Integrated Process....................... 100 4 Processing Comparable Company Valuation................................................. 103 4.1 Immediate Comparable Company Valuation.............................................. 103 4.1.1 Valuation Process.......................................................................... 103 4.1.2 Problems Associated with Immediate Comparable Company Valuation Models........................................................... 104 4.2 Single-Factor Comparable Company Valuation.......................................... 105 4.2.1 Valuation Process.......................................................................... 105 4.2.2 Problems Associated with Single-Factor Comparable Company Valuation Models........................................................... 108 4.3 Multi-Factor Comparable Company Valuation........................................... 120 4.3.1 Existing Models............................................................................. 120 4.3.2 Derivation of a Two-Factor Model Based on Book Value and Earnings.................................................................................... 125 5 Empirical Study................................................................................................. 139 5.1 Data.............................................................................................................139 5.1.1 Sample Selection............................................................................139 5.1.2 Variables........................................................................................ 141 5.2 Value Relevance......................................................................................... 142 5.2.1 Previous Empirical Results............................................................ 142 5.2.2 Variable Defmition............................................................................. 144 5.2.3 Hypotheses and Econometric Methodology....................................... 146 5.2.4 Results............................................................................................ 163 5.3 Pricing Accuracy..........................................................................................188 5.3.1 Previous Empirical Results............................................................ 188 5.3.2 Variable Definition and Methodology................................................ 190 5.3.3 Results............................................................................................ 193 6 Concluding Remarks.........................................................................................197 6.1 Implications for Business Valuation............................................................ 198 6.2 Implications for Future Research.................................................................202 7 Appendix............................................................................................................ 205 7.1 Detailed Derivation of the Two-Factor Comparable Company Valuation Model...................................................................................... 205 7.2 Proof of the Convergence of R2................................................................... 206 7.3 Industries Included in the Empirical Study..................................................208 7.4 Descriptive Statistics................................................................................... 209 7.4.1 Descriptive Statistics by Creditworthiness.................................... 209 7.4.2 Descriptive Statistics by Industry Structure........................................210 7.4.3 Descriptive Statistics by Asset Heaviness..................................... 211 Table of Contents XI 7.5 Annual R2 for Single-Factor Models........................................................212 7.6 Adjusting Creditworthiness for the Impact of Earnings...........................215 List of Figures................................................................................................. 219 List of Tables.................................................................................................. 221 References.......................................................................................................223

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