Value of Marketability : European evidence

The value of marketability affects investors as they cannot sell their privately held stocks instantly. This restriction should lead to a discount for lack of marketability, DLOM. The increasing flow of capital to private equity makes the DLOM a vital discount to understand for practitioners. This thesis studies the existence of DLOM in Europe and what are the factors driving it. This study uses the differences in pre-IPO and IPO prices and matches private stocks to similar public stocks and derives the DLOM using differences in valuations. These DLOMs are explained by factors established by earlier literature, such as, trading restriction period or maturity, risk, size and growth. Moreover, put option methods are used to examine the DLOMs. The average (median) DLOM for IPO and matched pairs methods are 32% (55%) and 61% (63%), respectively. The main factors driving the DLOM are maturity and risk. In conclusion, the exact relationship between the drivers remains unknown but option models can, on average, explain the discounts. Furthermore, put option methods are useful for an analyst as a starting point for DLOM.Arvopapereiden markkinakelpoisuuden arvo vaikuttaa sijoittajiin, koska he eivät voi myydä yksityisiä osakkeitaan välittömästi. Tämän rajoituksen tulisi johtaa likviditeetin puutoksesta johtuvaan alennukseen (discount for lack of marketability, DLOM). Likviditeettialennuksen ymmärtäminen on tärkeää, koska yksityisiin yrityksiin sijoitetaan yhä enemmän pääomaa. Tämä tutkielma tutkii likviditeettialennuksen olemassaoloa Euroopassa, ja sitä, mitkä tekijät ajavat sitä. Tässä tutkimuksessa käytetään pörssilistautumisen ja sitä edeltävän arvonmäärityksen, ja vertailukelpoisten yksityisten ja julkisten osakkeiden arvostuksen eroja määritettäessä likviditeettialennusta. Näitä alennuksia selitetään aikaisemman kirjallisuuden esittelemillä tekijöillä, kuten rajoituksen pituudella, riskillä, koolla ja kasvulla. Lisäksi, optiohinnoittelumenetelmiä käytetään alennuksen estimointiin. Keskimääräinen (mediaani) alennus IPO-tutkimuksessa on 32% (55%) ja vertailukelpoisten yritysten analyysissä 61% (63%). Tärkeimmät likviditeettialennuksen ajurit ovat rajoituksen pituus ja riski. Likviditeettialennuksen ja tärkeimpien tekijöiden tarkka suhde on kuitenkin vielä epäselvä, mutta optiomenetelmät pystyvät selittämään osan alennuksesta. Myyntioptiomenetelmät ovat kuitenkin hyödyllinen lähtökohta analyytikolle, joka estimoi likviditeettialennusta yksityiselle yritykselle

Critical role and screening practices of European business incubators.

Business incubators guide starting enterprises through their growth process and as such constitute a strong instrument to promote innovation and entrepreneurship. In this article we sketch the European business incubator landscape. Then we describe screening practices by European business incubators in 2003 and compare these results with the American incubators in the eighties. In the last phase a cautious link between screening practices and performance, measured in terms of tenant failure, is established. Most incubators do not screen potential tenants on a balanced set of factors, but concentrate either on the characteristics of the tenant's market or on the characteristics of the tenant's management team. However, we found that the tenant survival rate is positively related to a more balanced screening profile. Based on our study results, we propose some recommendations for the main stakeholders in the field: authorities, incubators and innovative entrepreneurs.Characteristics; Entrepreneurs; Factors; Field; Growth; Innovation; Management; Market; Performance; Processes; Recommendations; Research; Stakeholders; Studies;

Understanding business valuation : a practical guide to valuing small to medium-sized businesses

https://egrove.olemiss.edu/aicpa_guides/2736/thumbnail.jp

Liquidity and Asset Prices

We review the theories on how liquidity affects the required returns of capital assets and the empirical studies that test these theories. The theory predicts that both the level of liquidity and liquidity risk are priced, and empirical studies find the effects of liquidity on asset prices to be statistically significant and economically important, controlling for traditional risk measures and asset characteristics. Liquidity-based asset pricing empirically helps explain (1) the cross-section of stock returns, (2) how a reduction in stock liquidity result in a reduction in stock prices and an increase in expected stock returns, (3) the yield differential between on- and off-the-run Treasuries, (4) the yield spreads on corporate bonds, (5) the returns on hedge funds, (6) the valuation of closed-end funds, and (7) the low price of certain hard-to-trade securities relative to more liquid counterparts with identical cash flows, such as restricted stocks or illiquid derivatives. Liquidity can thus play a role in resolving a number of asset pricing puzzles such as the small-firm effect, the equity premium puzzle, and the risk-free rate puzzle.Liquidity; Liquidity Risk; Asset Prices

Private company discounts in mergers and acquisitions. evidence from U.S.A

PRIVATE COMPANY DISCOUNTS IN MERGERS AND ACQUISITIONS Evidence from U.S.A Purpose of the thesis The purpose of this thesis is to examine whether privately held companies are on average sold at a discount compared to publicly traded peer companies, and whether the possible discounts can be explained by factors related to company size, performance, industry it operates or acquisition time. Data The research sample consists of U.S. based acquisitions between the years 1989 and 2008. The initial sample consists 23,872 companies, from which is sorted the final sample of 242 companies. The final sample consists 121 acquisition pairs of where the acquisitions have similar characters. Research Methods The research design involves calculating four valuation multiples for each acquisition in order to determine valuation differences and the possible private company discount. Further on these valuation differences are studied with multiples regression models that include variables related to company’s status, size, performance, industry, and acquisition time. Results The results suggest that privately held companies, on average, are sold at a lower price compared to publicly traded peer companies. Company’s Net assets, Net debt and acquisition time can partly explain these transaction price differences

Taylor v. AIA Services Corp. Clerk\u27s Record v. 41 Dckt. 36916

https://digitalcommons.law.uidaho.edu/idaho_supreme_court_record_briefs/2211/thumbnail.jp

Profitability and marketability efficiencies of manufacturers in the association of Southeast Asian Nations: A multi-stage empirical study : A thesis submitted in partial fulfilment of the requirements for the Degree of Doctor of Philosophy at Lincoln University

The Association of Southeast Asian Nations (ASEAN) is developing as an attractive, promising destination for manufacturing operations in Asia. Since the 2015 establishment of ASEAN Economic Community, which aims to become a resilient manufacturing and business centre, it has fostered the growth of manufacturers in ASEAN. The manufacturing sector has contributed extensively to the economic development of ASEAN nations. Notable recent positive statistics report the impressive performance and continuous development of manufacturing in most ASEAN countries. Despite the acknowledged contribution and potential growth of manufacturing in ASEAN nations, the profit-generating and market-value efficiencies of manufacturing enterprises in ASEAN are still debatable. This study applies the bootstrap two-stage data envelopment analysis (DEA) to investigate the profitability and marketability efficiencies of 899 listed manufacturers in six selected ASEAN countries (ASEAN-6): Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam from 2007 to 2018. The study uses panel-data fractional and Tobit regression models to examine the effects of corporate factors on the listed manufacturers’ profitability and marketability efficiencies across the ASEAN-6 countries. Though the fractional regression model is the most advantageous method for fractional response variables, the Tobit regression model is most widely used for evaluating efficiency determinants. The bootstrap two-stage DEA results show that Indonesian and Singaporean listed manufacturing attains relatively high average profitability efficiency. Conversely, Malaysia, the Philippines, Thailand, and Vietnam listed manufacturers’ profitability efficiency has considerable room for improvement. Marketability efficiency levels are significantly lower than profitability efficiency for most ASEAN-6 countries (exception, Malaysia). Singaporean listed manufacturers have the highest marketability efficiency scores, followed by Indonesia, Malaysia, Thailand, the Philippines, and Vietnam listed manufacturers. The empirical results from the regression models show diverse, significant impacts of corporate financial and non-financial factors on the profitability and marketability efficiencies of the listed firms in the ASEAN-6 countries’ manufacturing sector and sub-sectors (high-technology and traditional production sub-sectors)

Understanding business valuation : a practical guide to valuing small to medium-sized businesses

https://egrove.olemiss.edu/aicpa_guides/1607/thumbnail.jp