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european valuation multiples: the investors’ sentiment about size

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  • gracia rubio Martín

    (Universidad Complutense de Madrid)

Abstract

The aim of this paper is to bring a new perspective to the role of control factors in MARKET-EBITDA, MARKET-SALES and MARKET-BOOK ratios in the European market, which are different from industry. We analyze the role of size and its interactions with the rest of the variables: profitability, risk, and structural asset factors. For this purpose, we have developed a valuation model using panel data methodology for listed European firms from the period 2002-2013. We found that size includes economic aspects of the companies, but also differen-tial investors’ perceptions about these economic aspects. It is a complementary explanation factor on the selection of the peer group with the rest of the variables. These findings help to understand the variation of market ratios and share prices depending on size in different economic conditions or economic cycles. This research is in accordance with the theoretical framework of market ratios and with size effect theory.

Suggested Citation

  • gracia rubio Martín, 2019. "european valuation multiples: the investors’ sentiment about size," Cuadernos de Economía - Spanish Journal of Economics and Finance, Asociación Cuadernos de Economía, vol. 42(119), pages 173-188, Mayo.
    • Handle: RePEc:cud:journl:v:42:y:2019:i:119:p:173-188
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    More about this item

    Keywords

    Valuation multiple; Market ratio; Size premium; Data panel; Mundlak model;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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