Business Valuation – Practice of domestic WSE members in 2016

Abstract

Goal – The aim of this paper is to check the popularity of various valuation methods in practice, as well as to present the statistics of parameters used in valuation processes and recommendations issued by domestic Warsaw Stock Exchange (WSE) members in the year 2016. Methodology – The study was prepared basing on 514 valuations of 118 companies gathered from 263 recommendations issued by 8 domestic WSE members. These input data were processed using statistical tools. Finally, they were aggregated and compared with textbooks and previous studies to present final conclusions. Results – Basing on the conducted analysis, the authors stated that broadly spread opinion about high popularity of DCF and relative model in business valuation is confirmed. More interestingly, it seems that practitioners often made valuations basing on the same or very similar assumptions, which is the most visible in the adopted period of detailed analysis. It should be noted that findings are based on historical data, which do not refer to the future and apply only to companies which are listed on the stock market. Originality – Authors’ analysis provides knowledge on how domestic WSE members apply the theory of business valuation in practice, which approaches are the most commonly used, and aims at explaining to answer why it is so. This knowledge can constitute a basis for reviewing and improving valuation tools used in stock recommendations. The authors encourage to conduct further discussion regarding the practice-theory gaps, and provide data to it.