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Valuation discounts and premia in restructuring and insolvency

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Publication Type
Book Chapter
Editor
Supervisor
Publication Year
2024
Journal
Book
Valuation for insolvency practitioners
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Publication End page
Publication Number of pages
145
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Abstract
Valuations of private companies can be required for a variety of purposes, including insolvency proceedings. The process for valuing private companies is deceptively complex. This is notably because there is no consensus on the size and determinants of two important valuation discounts that may need to be applied: the discount for lack of control (DLOC) and the discount for lack of marketability (DLOM). This book chapter zeroes in on the (often overlooked) determinants of the DLOC and the DLOM by examining US court cases. We make two important contributions to the existing literature. First, we expand the arsenal of empirical methods to estimate the DLOC and the DLOM by tapping into a hitherto underutilised source of information that can provide rich context and novel insights. Second, we illustrate that there is a link between these two discounts. This is contrary to conventional wisdom and brings clarity to the scarce literature and anecdotal evidence that suggest a potential interplay between control and marketability.
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Keywords
Valuation, Valuation Discount, Marketability, Control, Distress, Insolvency, Restructuring
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