The Choice of Valuation Techniques in Practice: Education versus Profession

Kjell Nyborg and Lilia Mukhlynina

No 11303, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We use a survey approach to learn about valuation professionals’ choices and implementations of valuation techniques in practice. The survey design allows us to control for a respondent’s professional subgroup (e.g., consulting), education, experience, and valuation purpose characteristics. We find support for the “sociological hypothesis†that profession matters more than education; different professions have different valuation cultures. Other factors are less important. There are also many commonalities across respondents. Most use both multiples and DCF, but implement DCF in a way that almost turns it into a multiples exercise. Confusion reigns with respect to interest tax shields and the WACC. Higher educational levels do not reduce the confusion. Our overall findings matter because valuation professionals function as intermediaries in the capital allocation process. The relative unimportance of education raises questions about the role and benefit of higher level finance education.

Keywords: Valuation; Valuation cultures; Sociological hypothesis; Multiples; Dcf; Finance education (search for similar items in EconPapers)
JEL-codes: A11 A14 A20 G02 G24 G31 G32 (search for similar items in EconPapers)
Date: 2016-05
New Economics Papers: this item is included in nep-lma and nep-net
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The Choice of Valuation Techniques in Practice: Education Versus Profession (2020)
Working Paper: The Choice of Valuation Techniques in Practice: Education versus Profession (2016)
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