The Choice of Valuation Techniques in Practice: Education Versus Profession

60 Pages Posted: 7 Jun 2016

See all articles by Lilia Mukhlynina

Lilia Mukhlynina

University of Zurich - Department of Banking and Finance

Kjell G. Nyborg

University of Zurich - Department of Banking and Finance; Centre for Economic Policy Research (CEPR); Swiss Finance Institute

Multiple version iconThere are 2 versions of this paper

Date Written: May 2016

Abstract

We use a survey approach to learn about valuation professionals' choices and implementations of valuation techniques in practice. The survey design allows us to control for a respondent's professional subgroup (e.g., consulting), education, experience, and valuation purpose characteristics. We find support for the 'sociological hypothesis' that profession matters more than education; different professions have different valuation cultures. Other factors are less important. There are also many commonalities across respondents. Most use both multiples and DCF, but implement DCF in a way that almost turns it into a multiples exercise. Confusion reigns with respect to interest tax shields and the WACC. Higher educational levels do not reduce the confusion. Our overall findings matter because valuation professionals function as intermediaries in the capital allocation process. The relative unimportance of education raises questions about the role and benefit of higher level finance education.

Keywords: DCF, finance education, multiples, sociological hypothesis, Valuation, valuation cultures

JEL Classification: A11, A14, A20, G02, G24, G31, G32

Suggested Citation

Mukhlynina, Lilia and Nyborg, Kjell G., The Choice of Valuation Techniques in Practice: Education Versus Profession (May 2016). CEPR Discussion Paper No. DP11303. Available at SSRN: https://ssrn.com/abstract=2790819

Lilia Mukhlynina (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Kjell G. Nyborg

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
Zürich, 8032
Switzerland
+41 (0)44 634 2980 (Phone)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

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