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102 Errors in Company Valuations (102 Errores en Valoraciones de Empresas)

38 Pages Posted: 14 Apr 2006  

Pablo Fernandez

University of Navarra - IESE Business School

Date Written: March 27, 2006

Abstract

This paper contains a collection and classification of 96 errors seen in company valuations performed by financial analysts, investment banks and financial consultants. The author had access to most of the valuations referred to in this paper in his capacity as a consultant in company acquisitions, sales, mergers, and arbitrage processes.

We classify the errors in six main categories: 1) Errors in the discount rate calculation and concerning the riskiness of the company; 2) Errors when calculating or forecasting the expected cash flows; 3) Errors in the calculation of the residual value; 4) Inconsistencies and conceptual errors; 5) Errors when interpreting the valuation; and 6) Organizational errors.

Notes: Downloadable document is in Spanish.

JEL Classification: G12, G31, M21

Suggested Citation

Fernandez, Pablo, 102 Errors in Company Valuations (102 Errores en Valoraciones de Empresas) (March 27, 2006). Available at SSRN: https://ssrn.com/abstract=895248 or http://dx.doi.org/10.2139/ssrn.895248

Pablo Fernandez (Contact Author)

University of Navarra - IESE Business School ( email )

Camino del Cerro del Aguila 3
28023 Madrid
Spain
+34 91 357 0809 (Phone)
+34 91 357 2913 (Fax)

HOME PAGE: http://web.iese.edu/PabloFernandez/

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