What Value for Marketability?

29 Pages Posted: 12 Sep 2008

See all articles by Anthony J. Anderson

Anthony J. Anderson

Howard University - School of Business

Michael S. Long

Rutgers University at Newark

Date Written: September 11, 2008

Abstract

This study compares value of small privately held firms with similarly sized, small publicly held firms when the businesses are actually sold to ascertain the liquidity discount. These results are important to better understand and estimate the value of closely held firms. The data show these liquidity discounts are non-existent for smaller firms and much less than expected for larger ones. For the larger firms in our study, $100 million to $1 billion in price, the public firms do sell for a higher value than comparable private firms. However, for the smaller firms, $20 to $100 million in price, the private firms actually have a slightly higher value than comparably sized public firms. The effect of SOX on the valuation is also considered. We find that, from the stand point of net effect on value, there is a distinct and statistically significant negative effect on the firms in our larger group and a statistically inconclusive effect on the firms in our smaller group.

Keywords: Valuation, Marketability, Liquidity, Privately Held, SOX

JEL Classification: G12, G38

Suggested Citation

Anderson, Anthony J. and Long, Michael S., What Value for Marketability? (September 11, 2008). Available at SSRN: https://ssrn.com/abstract=1267035 or http://dx.doi.org/10.2139/ssrn.1267035

Anthony J. Anderson (Contact Author)

Howard University - School of Business ( email )

Washington, DC 20059
United States

Michael S. Long

Rutgers University at Newark ( email )

111 Washington Avenue
Newark, NJ 07102
United States
973-353-5471 (Phone)

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