Option-Style Multi-Factor Comparable Company Valuation for Practical Use

Meitner, Matthias

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URL: http://ub-madoc.bib.uni-mannheim.de/150
URN: urn:nbn:de:bsz:180-madoc-1505
Document Type: Working paper
Year of publication: 2003
The title of a journal, publication series: None
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: G12 G31 M21 M41 ,
Subject headings (SWD): Unternehmensbewertung
Abstract: Classical single-factor comparable company valuation (CCV) like e.g. valuation using the price-earnings ratio is associated with several shortcomings. The two most important are the non-applicability of negative values in the basis of reference and the high requirements to the qualitative characteristics of comparable companies. This paper develops a multi-factor CCV model based on substance and performance related accounting attributes that largely overcomes these drawbacks. Additionally, the model allows to depict expected future earnings development economically sounder than single-factor models. Furthermore, by accounting for managements option to adapt firm assets differently or to liquidate the company the model can conclusively assign positive stock prices to currently negatively performing companies.
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