BV News and Trends February 2023
A monthly roundup of key developments of interest to business valuation experts.
Damodaran examines impact of inflation on profitability
In his fifth data update for 2023, Professor Aswath Damodaran (New York University Stern School of Business) focuses on trends in company profitability in 2022, including the impacts of inflation.
Inflation appears to have peaked, per Kroll
The latest cost of capital infographic from Kroll says that inflation seems to have topped out toward the end of 2022.
Year-end 2022 data now in the Cost of Capital Professional
Year-end 2022 data, including equity risk premia, CRSP decile size premia, and industry betas/IRPs, are now available in BVR’s Cost of Capital Professional platform.
BV News and Trends January 2023
A monthly roundup of key developments of interest to business valuation experts.
High ESG scores lower the cost of capital, study finds
A recent paper says there is significant evidence that companies having a higher environmental, social, and governance (ESG) score have a lower cost of capital.
Business Valuation Update Yearbook, 2023 Edition
January 2023 PDF, Softcover (426 pages)
BVR (editor)
Business Valuation Resources, LLC
Damodaran posts his data update for 2023
At the beginning of each year, Professor Aswath Damodaran (New York University Stern School of Business) generously posts a great amount of data on his website that include risk-free rates, equity risk premiums (ERPs), corporate default spreads, corporate tax rates, country risk premiums, and other data—all of which are free.
BV News and Trends December 2022
A monthly roundup of key developments of interest to business valuation experts.
Firm nimbleness as a measure of risk
Investors perceive firms with higher levels of inflexibility, such as not being able to scale operations or adapt to changes in profitability, as being riskier and have a higher implied cost of equity, researchers conclude in a new paper.
Estimating the Extra Risk of Customer Concentration
Interesting comments were made by Roger Grabowski (Kroll), who conducted a session at the American Society of Appraisers International Conference. He discusses the research in this area and how to examine the customer concentration of guideline public companies.
BV News and Trends November 2022
A monthly roundup of key developments of interest to business valuation experts.
Ang Offers SSBV Members More Evidence of the Lack of a Size Effect
Clifford Ang (Compass Lexecon), who offered an impassioned plea to a large group from the UK’s Society of Shares and Business Valuers (SSBV), has become one of the leading proponents of eliminating or minimizing the traditional size premia. Ang has written a number of articles on the size effect and has a new book, Applied Valuation, due out early next year.
Inflation showcased in lead-off session at the AICPA FVS conference
As this issue rolls off the (virtual) presses, BVWire is attending the AICPA & CIMA Forensic and Valuation Services Conference.
Competition keeps cost of capital platform prices down, experts believe
That’s the feeling of a panel of veteran valuation experts who presented at the recent Forensic and Valuation Conference hosted by the Virginia State Society of CPAs.
Inflation, volatility trigger increase in ERP, per Kroll
Kroll has increased its recommended U.S. equity risk premium (ERP) from 5.5% to 6.0% when developing USD-denominated discount rates as of Oct. 18, 2022.
Another call to discard CAPM
“Unfortunately—and I write this with a heavy heart—the CAPM is not just imperfect; it is so badly wrong that it is best ignored,” writes Ivo Welch (UCLA Anderson Graduate School of Management) in an article “The Cost of Capital: If Not the CAPM, Then What?”
BV News and Trends September 2022
A monthly roundup of key developments of interest to business valuation experts.
Nath comments on Hitchner v. Damodaran
The author of a number of seminal articles on control premiums, minority interest valuation issues, and cost of capital, Eric Nath (Eric Nath & Associates) comments on a recent article in Business Valuation Update.
Let's Get Real About the Dividend Growth Model
The dividend growth model, sometimes called the dividend discount model or discounted cash flow model, is a commonly used tool for estimating the cost of equity capital, particularly in the context of utility rate setting and unitary appraisal. Although the assumption of constant growth in perpetuity is almost never realistic, the constant growth version of the model is still commonly used in practice. However, given modern computing technology, there is no reason not to use ...
BV News and Trends August 2022
A monthly roundup of key developments of interest to business valuation experts.
Hitchner rebuts Damodaran’s attacks on cost of capital inputs
Just keep on doing what you’re doing with cost of capital, advises Jim Hitchner (Valuation Products and Services), despite what academics say.
Trugman’s Approach to Assessing Company-Specific Risk
This is an excerpt from the new sixth edition of Understanding Business Valuation, which has a companion website that includes a good selection of full sample valuation reports and other supporting material.
BV News and Trends June 2022
A monthly roundup of key developments of interest to business valuation experts.
Butler comments on Damodaran’s ‘dynamite’ remarks regarding COE
Last weeks’ issue covered some very choice words (some of which we can’t print here) Aswath Damodaran (New York University Stern School of Business) made about various inputs some analysts use to determine the cost of equity (COE).