Selecting Comparables for the Valuation of European Firms
AbstractThis paper investigates which comparables selection method generates the most precise forecasts when valuing European companies with the enterprise value to EBIT multiple. We also consider the USA as a reference point. It turns out that selecting comparable companies with similar return on assets clearly outperforms selections according to industry membership or total assets. Moreover, we investigate whether comparables should be selected from the same country, from the same region, or from all OECD members. For most European countries, choosing comparables from the 15 European Union member states yields the best forecasts. In contrast, for the UK and the US, comparables should be chosen from the same country only.
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Bibliographic InfoPaper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2005-002.
Length: 27 pages
Date of creation: Feb 2005
Date of revision:
comparables; selection method; valuing companies; forecasts; EBIT; industry membership; ROA;
Find related papers by JEL classification:
- G19 - Financial Economics - - General Financial Markets - - - Other
- M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-10-29 (All new papers)
- NEP-EEC-2005-10-29 (European Economics)
- NEP-FIN-2005-10-29 (Finance)
- NEP-FOR-2005-10-29 (Forecasting)
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