Methods of choice in the valuation of ordinary shareholders’ equity: evidence from theory and practice

Abstract

The question that inevitably surfaces in practice, and certainly in lecture halls, is which equity valuation method is superior. Popular opinion holds that academia and investment practitioners may have different preferences in this regard. This article investigates which primary minority and majority equity valuation methods are advocated by academia, and how well these preferences are aligned with the equity valuation methods that investment practitioners apply in practice. The research results reveal that, contrary to popular belief, academia and practice are fairly well aligned in terms of preferred equity valuation methods, with notable differences in their respective approaches.