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The Choice of Valuation Techniques in Practice: Education versus Profession


  • Lilia Mukhlynina

    (University of Zurich - Department of Banking and Finance)

  • Kjell G. Nyborg

    (University of Zurich - Department of Banking and Finance; Centre for Economic Policy Research (CEPR); Ecole Polytechnique Fédérale de Lausanne - Swiss Finance Institute)


We use a survey approach to learn about valuation professionals’ choices and implementations of valuation techniques in practice. The survey design allows us to control for a respondent’s professional subgroup (e.g., consulting), education, experience, and valuation purpose characteristics. We find support for the “sociological hypothesis” that profession matters more than education; different professions have different valuation cultures. Other factors are less important. There are also many commonalities across respondents. Most use both multiples and DCF, but implement DCF in a way that almost turns it into a multiples exercise. Confusion reigns with respect to interest tax shields and the WACC. Higher educational levels do not reduce the confusion. Our overall findings matter because valuation professionals function as intermediaries in the capital allocation process. The relative unimportance of education raises questions about the role and benefit of higher level finance education.

Suggested Citation

  • Lilia Mukhlynina & Kjell G. Nyborg, 2016. "The Choice of Valuation Techniques in Practice: Education versus Profession," Swiss Finance Institute Research Paper Series 16-36, Swiss Finance Institute.
  • Handle: RePEc:chf:rpseri:rp1636

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    References listed on IDEAS

    1. Ian A. Cooper & Kjell G. Nyborg, 2008. "Tax‐Adjusted Discount Rates with Investor Taxes and Risky Debt," Financial Management, Financial Management Association International, vol. 37(2), pages 365-379, June.
    2. Alford, Aw, 1992. "The Effect Of The Set Of Comparable Firms On The Accuracy Of The Price Earnings Valuation Method," Journal of Accounting Research, Wiley Blackwell, vol. 30(1), pages 94-108.
    3. Glen C. Arnold & Panos D. Hatzopoulos, 2000. "The Theory-Practice Gap in Capital Budgeting: Evidence from the United Kingdom," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(5&6), pages 603-626.
    4. Miles, James A. & Ezzell, John R., 1980. "The Weighted Average Cost of Capital, Perfect Capital Markets, and Project Life: A Clarification," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 15(3), pages 719-730, September.
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    Cited by:

    1. Olivier, Jacques & Dessaint, Olivier & Otto, Clemens A. & Thesmar, David, 2017. "CAPM-Based Company (Mis)valuations," HEC Research Papers Series 1235, HEC Paris, revised 20 Mar 2018.

    More about this item


    Valuation; Valuation Cultures; Sociological Hypothesis; Multiples; DCF; Finance Education;

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • A11 - General Economics and Teaching - - General Economics - - - Role of Economics; Role of Economists
    • A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
    • A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General

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