80 common and uncommon errors in company valuation

Pablo Fernandez

No D/550, IESE Research Papers from IESE Business School

Abstract: This paper contains a collection and classification of 80 errors seen in company valuations performed by financial analysts, investment banks and financial consultants. The author had access to most of the valuations referred to in this paper in his capacity as a consultant in company acquisitions, sales and mergers, and arbitrage processes. Some of the errors are taken from published reports by financial analysts. We classify the errors in six main categories: 1) Errors in the discount rate calculation and concerning the riskiness of the company; 2) Errors when calculating or forecasting the expected cash flows; 3) Errors in the calculation of the residual value; 4) Inconsistencies and conceptual errors; 5) Errors when interpreting the valuation; and 6) Organizational errors.

Keywords: valuation; company valuation; valuation errors (search for similar items in EconPapers)
JEL-codes: G12 G31 M21 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2004-03-19
New Economics Papers: this item is included in nep-cfn and nep-fin
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:iesewp:d-0550

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