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Lost Profits Damages to New Businesses: Adjusting for Survival

Author

Listed:
  • MacPherson David A

    (Florida State University)

  • Stephenson Stanley P.

    (Litigation Economics)

Abstract

Survival risk of new businesses is a challenging issue to incorporate into lost profits analyses used in litigation, an issue some financial experts and courts ignore rather than consider explicitly. This paper considers several ways to make qualitative and quantitative adjustments for the survival rates of new businesses. The paper concludes firm-specific modeling of survival rates is the most appropriate way to weight future economic returns because it offers the best alternative in terms of fitting the analysis to the facts of the case and doing so in a credible and clear manner.

Suggested Citation

  • MacPherson David A & Stephenson Stanley P., 2006. "Lost Profits Damages to New Businesses: Adjusting for Survival," Journal of Business Valuation and Economic Loss Analysis, De Gruyter, vol. 1(1), pages 1-14, October.
    • Handle: RePEc:bpj:jbvela:v:1:y:2006:i:1:n:2
    DOI: 10.2202/1932-9156.1000
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