Emotional Returns and Emotional Costs in Privately Held Family Businesses: Advancing Traditional Business Valuation

11 Pages Posted: 19 May 2008

See all articles by Joseph H. Astrachan

Joseph H. Astrachan

Kennesaw State University - Michael J. Coles College of Business

Peter Jaskiewicz

EBS Universität für Wirtschaft und Recht - EBS Business School - Strascheg Institute for Innovation and Entrepreneurship

Abstract

This article introduces a formula to assess the total value of privately held family businesses from the owner's perspective. It is argued that the total value of a business is not only composed of its financial worth and private benefits, as is usually assumed by traditional financial theory, but that emotional components also have an impact on valuation. In particular, it is assumed that emotional returns (ER) positively affect total value, whereas emotional costs (EC) negatively affect total value. Even though every stakeholder faces emotional costs and returns, it is solely the family business owner who ultimately decides on the worth of a business and consequently factors ER-EC into his or her valuation. The presented formula provides a better understanding of investment decisions in family businesses and a more accurate valuation of these businesses.

Suggested Citation

Astrachan, Joseph H. and Jaskiewicz, Peter, Emotional Returns and Emotional Costs in Privately Held Family Businesses: Advancing Traditional Business Valuation. Family Business Review, Vol. 21, No. 2, pp. 139-149, June 2008, Available at SSRN: https://ssrn.com/abstract=1134371 or http://dx.doi.org/10.1111/j.1741-6248.2008.00115.x

Joseph H. Astrachan (Contact Author)

Kennesaw State University - Michael J. Coles College of Business ( email )

1000 Chastain Road
Kennesaw, GA 30144
United States

Peter Jaskiewicz

EBS Universität für Wirtschaft und Recht - EBS Business School - Strascheg Institute for Innovation and Entrepreneurship ( email )

Gustav-Stresemann-Ring 3
65189 Wiesbaden, Hessen
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
3
Abstract Views
1,746
PlumX Metrics