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Selecting comparables for the valuation of European firms

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  • Dittmann, Ingolf
  • Weiner, Christian

Abstract

This 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.

Suggested Citation

  • Dittmann, Ingolf & Weiner, Christian, 2005. "Selecting comparables for the valuation of European firms," SFB 649 Discussion Papers 2005-002, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    • Handle: RePEc:zbw:sfb649:sfb649dp2005-002
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    References listed on IDEAS

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    Cited by:

    1. Nigohos Kanaryan, 2019. "Enhancing The Adjustments Of Market Multiples For Better Operating Efficiency," Economic Archive, D. A. Tsenov Academy of Economics, Svishtov, Bulgaria, issue 4 Year 20, pages 3-20.
    2. Barbara Fidanza, 2008. "The Valuation by Multiples of Italian Firms," Working Papers 14-2008, Macerata University, Department of Studies on Economic Development (DiSSE), revised Nov 2008.
    3. Veronika Staňková & Miloš Mařík, 2020. "Selecting a peer group of companies for valuation and outline of future research using machine learning [K problému výběru porovnatelné skupiny podniků pro ocenění a nástin budoucího výzkumu s využ," Oceňování, Prague University of Economics and Business, vol. 13(3-4), pages 51-64.
    4. José Couto & Paula Brito & António Cerqueira, 2017. "The Method of Market Multiples on the Valuation of Companies: A Multivariate Approach," FEP Working Papers 586, Universidade do Porto, Faculdade de Economia do Porto.

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    JEL classification:

    • G19 - Financial Economics - - General Financial Markets - - - Other
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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