Multiples’ Valuation: The Selection of Cross-Border Comparable Firms

Ricardo Goulart Serra and Luiz Paulo Lopes Fávero

Emerging Markets Finance and Trade, 2018, vol. 54, issue 9, 1973-1992

Abstract: We studied whether mean industry multiples are similar in Brazil and in the United States. Using multilevel models (hierarchical linear model and additive crossed random-effects model), we concluded that there exists significant variability within firms from the same industry and significant variability between countries (Brazil and United States). The same tests were applied to firms grouped in clusters by similarity of economic fundamentals and we concluded that part of the variability shifts from (a) the variability within firms from the same industry and the variability between countries to (b) the variability between clusters, which is desirable in multiples’ valuation.

Date: 2018
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DOI: 10.1080/1540496X.2017.1336084

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