Advanced Search
MyIDEAS: Login to save this paper or follow this series

Valuing high technology growth firms

Contents:

Author Info

  • Soenke Sievers

    (University of Cologne)

  • Jan Klobucnik

    (CGS, University of Cologne)

Registered author(s):

    Abstract

    For the valuation of fast growing innovative firms Schwartz and Moon (2000, 2001) develop a fundamentals based valuation model where key parameters, such as revenues and expenses, follow stochastic processes. Guided by economic theory, this paper tests this model on a sample of around 30,000 technology firm quarter observations from 1992 to 2009 using realized accounting data and benchmark it against the traditional Enterprise Value-Sales Multiple. Our results show that the Schwartz-Moon model is on average nearly as accurate as the multiple approach, while it is even more accurate in certain industries such as pharmaceutical and computer firms. Most importantly, the Schwartz-Moon model shows the ability to indicate severe market over- or undervaluation.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.cgs.uni-koeln.de/fileadmin/wiso_fak/cgs/pdf/working_paper/cgswp_02-07.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Cologne Graduate School in Management, Economics and Social Sciences in its series Cologne Graduate School Working Paper Series with number 02-07.

    as in new window
    Length:
    Date of creation: 07 Nov 2011
    Date of revision:
    Handle: RePEc:cgr:cgsser:02-07

    Contact details of provider:
    Postal: Albertus Magnus Platz, 50923 Köln
    Phone: 0221 / 470 5607
    Fax: 0221 / 470 5179
    Email:
    Web page: http://www.cgs.uni-koeln.de/
    More information through EDIRC

    Related research

    Keywords: Schwartz-Moon model; market mispricing; empirical test; company valuation;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Luigi Zingales, 2000. "In Search of New Foundations," CRSP working papers 515, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
    2. Mitchell A. Petersen, 2005. "Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches," NBER Working Papers 11280, National Bureau of Economic Research, Inc.
    3. Jerker Denrell, 2004. "Random Walks and Sustained Competitive Advantage," Management Science, INFORMS, vol. 50(7), pages 922-934, July.
    4. Robert E. Lucas & Jr., 1967. "Adjustment Costs and the Theory of Supply," Journal of Political Economy, University of Chicago Press, vol. 75, pages 321.
    5. Coakley, Jerry & Fuertes, Ana-Maria, 2006. "Valuation ratios and price deviations from fundamentals," Journal of Banking & Finance, Elsevier, vol. 30(8), pages 2325-2346, August.
    6. Core, John E. & Guay, Wayne R. & Buskirk, Andrew Van, 2003. "Market valuations in the New Economy: an investigation of what has changed," Journal of Accounting and Economics, Elsevier, vol. 34(1-3), pages 43-67, January.
    7. Charles M. C. Lee & James Myers & Bhaskaran Swaminathan, 1999. "What is the Intrinsic Value of the Dow?," Journal of Finance, American Finance Association, vol. 54(5), pages 1693-1741, October.
    8. Malcolm Baker & Jeffrey Wurgler, 2006. "Investor Sentiment and the Cross-Section of Stock Returns," Journal of Finance, American Finance Association, vol. 61(4), pages 1645-1680, 08.
    9. Steven N. Kaplan & Richard S. Ruback, 1994. "The Valuation of Cash Flow Forecasts: An Empirical Analysis," NBER Working Papers 4724, National Bureau of Economic Research, Inc.
    10. Sanjeev Bhojraj, 2002. "Who Is My Peer? A Valuation-Based Approach to the Selection of Comparable Firms," Journal of Accounting Research, Wiley Blackwell, vol. 40(2), pages 407-439, 05.
    11. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-75, May.
    12. Nilabhra Bhattacharya & Elizabeth Demers & Philip Joos, 2010. "The Relevance of Accounting Information in a Stock Market Bubble: Evidence from Internet IPOs," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 37(3-4), pages 291-321.
    13. Cumming, Douglas J. & MacIntosh, Jeffrey G., 2003. "A cross-country comparison of full and partial venture capital exits," Journal of Banking & Finance, Elsevier, vol. 27(3), pages 511-548, March.
    14. Schwartz, Eduardo S & Moon, Mark, 2001. "Rational Pricing of Internet Companies Revisited," The Financial Review, Eastern Finance Association, vol. 36(4), pages 7-25, November.
    15. Ana Simpson, 2010. ""Discussion of" The Relevance of Accounting Information in a Stock Market Bubble: Evidence from Internet IPOs," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 37(3-4), pages 322-331.
    16. Inderst, Roman & Muller, Holger M., 2004. "The effect of capital market characteristics on the value of start-up firms," Journal of Financial Economics, Elsevier, vol. 72(2), pages 319-356, May.
    17. Maria Vassalou & Yuhang Xing, 2004. "Default Risk in Equity Returns," Journal of Finance, American Finance Association, vol. 59(2), pages 831-868, 04.
    18. Eli Bartov, 2002. "Valuation of Internet Stocks-An IPO Perspective," Journal of Accounting Research, Wiley Blackwell, vol. 40(2), pages 321-346, 05.
    19. Cumming, Douglas & Fleming, Grant & Suchard, Jo-Ann, 2005. "Venture capitalist value-added activities, fundraising and drawdowns," Journal of Banking & Finance, Elsevier, vol. 29(2), pages 295-331, February.
    20. Eli Ofek & Matthew Richardson, 2003. "DotCom Mania: The Rise and Fall of Internet Stock Prices," Journal of Finance, American Finance Association, vol. 58(3), pages 1113-1138, 06.
    21. Jing Liu, 2002. "Equity Valuation Using Multiples," Journal of Accounting Research, Wiley Blackwell, vol. 40(1), pages 135-172, 03.
    22. Richard G. Sloan, 2002. "Discussion of Who Is My Peer? A Valuation-Based Approach to the Selection of Comparable Firms," Journal of Accounting Research, Wiley Blackwell, vol. 40(2), pages 441-444, 05.
    23. Eberhart, Allan C., 2001. "Comparable firms and the precision of equity valuations," Journal of Banking & Finance, Elsevier, vol. 25(7), pages 1367-1400, July.
    24. Ross, Stephen A, 1985. " Debt and Taxes and Uncertainty," Journal of Finance, American Finance Association, vol. 40(3), pages 637-57, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:cgr:cgsser:02-07. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David Kusterer).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.