How fundamental are fundamental values? Valuation methods and their impact on the performance of German venture capitalists

Dittmann, Ingolf ; Maug, Ernst ; Kemper, Johannes

DOI:	https://doi.org/10.1111/j.1354-7798.2004.00268.x
URL:	https://ssrn.com/abstract=619486
Additional URL:	https://onlinelibrary.wiley.com/doi/pdf/10.1111/j....
Document Type:	Article
Year of publication:	2004
The title of a journal, publication series:	European Financial Management
Volume:	10
Issue number:	4
Page range:	609-638
Place of publication:	Oxford
Publishing house:	Wiley-Blackwell
ISSN:	1354-7798 , 1468-036X
Publication language:	English
Institution:	Business School > ABWL u. Corporate Finance (Maug)
Subject:	330 Economics
Abstract:	This paper studies how the use of alternative valuation methodologies affects investment performance for a sample of 53 German venture capitalists. We measure investment performance by the amount of investments they need to write off and by the number of companies they take public. We find that a significant number of investment managers use discounted cash flow (DCF) techniques, but only a minority appears to use a discount rate related to the cost of capital. The majority applies DCF using subjective discount rates. We present evidence that the use of DCF is correlated with superi or investment performance only if applied in conjunction with an objectifiable discount rate. Also, funds that inves t with a longer horizon perform better. The use of multiples is not significantly correlated with investment performance. We conclude that a focus on fundamental values confers an advantage.

Dieser Datensatz wurde nicht während einer Tätigkeit an der Universität Mannheim veröffentlicht, dies ist eine Externe Publikation.

Dittmann, Ingolf ; Maug, Ernst ; Kemper, Johannes (2004) How fundamental are fundamental values? Valuation methods and their impact on the performance of German venture capitalists. European Financial Management Oxford 10 4 609-638 [Article]

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