The Characteristics, Valuation Methods, and Information Use of Valuation Specialists

69 Pages Posted: 23 Mar 2020

See all articles by Kristian D. Allee

Kristian D. Allee

University of Arkansas - Department of Accounting

Devon Erickson

Utah State University - Huntsman School of Business

Adam M. Esplin

University of Texas at El Paso

Teri Lombardi Yohn

Emory University Goizueta Business School

Date Written: March 11, 2020

Abstract

We provide insights into the inputs and valuation models used by valuation specialists. We survey 172 valuation specialists and conduct several follow-up interviews covering various topics, including the valuation inputs, models, and industry information that they use, as well as how they estimate long-term growth and the cost of capital. We find that valuation specialists rely on their professional judgment to select a valuation model but prefer the discounted cash flow (DCF) model. They primarily rely on the firm’s historical performance when forecasting the financial statements, but communication with management is particularly relevant for forecasting future earnings or cash flows. When estimating the cost of capital, they most commonly use the risk-free rate with subjective adjustments. The results of our study provide insights on the information use of valuation specialists that are relevant to other valuation specialists, managers, academic researchers, and regulators.

Keywords: Valuation, Valuation Specialists, Private Company, Valuation Model Choice

JEL Classification: M41, G12, G17, G32

Suggested Citation

Allee, Kristian D. and Erickson, Devon and Esplin, Adam M. and Yohn, Teri Lombardi, The Characteristics, Valuation Methods, and Information Use of Valuation Specialists (March 11, 2020). Kelley School of Business Research Paper No. 2020-62, Available at SSRN: https://ssrn.com/abstract=3553019 or http://dx.doi.org/10.2139/ssrn.3553019

Kristian D. Allee (Contact Author)

University of Arkansas - Department of Accounting ( email )

University of Arkansas
Business Building 458
Fayetteville, AR 72701
United States
479-575-5227 (Phone)

Devon Erickson

Utah State University - Huntsman School of Business ( email )

3540 Old Main Hill
Logan, UT 84322-3540
United States

Adam M. Esplin

University of Texas at El Paso ( email )

500 W University Ave
El Paso, TX 79902
United States

Teri Lombardi Yohn

Emory University Goizueta Business School ( email )

201 Dowman Drive
Atlanta, GA 30322
United States

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