The market value of SMEs: a comparative study between private and listed firms in alternative stock markets
Entity
UAM. Departamento de Financiación e Investigación ComercialPublisher
Springer NatureDate
2023-01-05Citation
10.1007/s10436-022-00420-z
Annals of Finance 19.1 (2023): 95-117
ISSN
16142454DOI
10.1007/s10436-022-00420-zFunded by
Funding Open Access funding provided thanks to the CRUE‑CSIC agreement with Springer Nature.Editor's Version
https://doi.org/10.1007/s10436-022-00420-zSubjects
Firm value; Valuation multiples; Private discount; Financial valuation; Alternative stock markets; EconomíaRights
© The Author(s) 2023Abstract
This study aims to compare the market value of private firms and publicly listed
small and medium-sized firms (SMEs) in alternative stock markets through a private
discount approach with estimates of value based on discounted cash flow projections
and along with a comparable multiples approach. The valuation methodology applied
in this study yielded a final sample that included 232 observations between public
and private companies in the Spanish market. To calculate the discount, we apply
the different approaches of discounted cash flow and multiples, such as valuation,
earnings, book value, and revenue. Our results conclude there is no private discount,
instead, the outcomes of this article suggest a premium over public firms for some
ratios. The negative private company discounts mean a premium and, on the other
hand, some multiples suggest a discount according to the method of valuation. This
paper proves private discounts resulted does not have any comparable value within
the same country although all firms in Spain use the same currency. We value the
discounted cash flows of our forecasts using a discount rate based on the Capital
Asset Pricing Model (CAPM), so our study can also be viewed as a test sensitivity
of CAPM-based approaches to equity risk premium, terminal value, and growth rate.
Furthermore, we compare historical transaction multiples of privately held companies
with transaction multiples of similar publicly held firms
Files in this item
Google Scholar:Rodríguez-Valencia, Leslie
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Lamothe Fernández, Prosper
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Alaminos, David
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