Negative value indicators in relative valuation-An empirical perspective
Sommer F, Rose C, Wöhrmann A (2014)
Publication Type: Journal article, Review article
Publication year: 2014
Journal
Book Volume: 9
Pages Range: 23-54
Journal Issue: 1
Abstract
This study investigates whether firms with negative value indicators (e.g. negative EBIT) should be excluded from peer groups in relative valuation. While this approach is chosen in many empirical studies and recommended by practitioners, valuation textbooks suggest including firms with negative value indicators in the peer groups. Evidence regarding which alternative leads to more accurate firm value estimates is missing. We conduct an empirical study using a sample from the S&P Composite 1,500 Index for the period 1994-2010 to answer this question. We find that, contrary to textbook recommendations, eliminating firms with negative value indicators generally leads to more accurate firm value estimates.
Involved external institutions
Germany (DE)How to cite
APA:
Sommer, F., Rose, C., & Wöhrmann, A. (2014). Negative value indicators in relative valuation-An empirical perspective. Journal of Business Valuation and Economic Loss Analysis, 9(1), 23-54. https://doi.org/10.1515/jbvela-2013-0024
MLA:
Sommer, Friedrich, Christian Rose, and Arnt Wöhrmann. "Negative value indicators in relative valuation-An empirical perspective." Journal of Business Valuation and Economic Loss Analysis 9.1 (2014): 23-54.
BibTeX: Download