Front-Burner Issues Presented at This Year’s NYSSCPA BV Conference
Inputs into the cost of capital, cryptocurrency, and financial projections are just a few of the important topics discussed at the annual business valuation conference of the New York State Society of CPAs (NYSSCPA) in New York City. BVU attends this event every year, and here are a few takeaways from the sessions.
Hot-button issues presented at NYSSCPA BV conference
Cryptocurrency, financial projections, and inputs into the cost of capital were just a few of the important topics discussed at the annual business valuation conference of the New York State Society of CPAs (NYSSCPA) on May 20 in New York City.
Two Articles Addressing Firm Quality and Its Impact on the Size Effect
The authors discuss two recent papers that present the concept of firms’ quality and show that it plays an important role in understanding the size effect. Also discussed are papers that present a differing view.
No End in Sight to Size Effect Debate
A look at several recent articles on the so-called size premium that perpetuate the debate on this topic. Some appraisers feel that the size effect has diminished or disappeared since it was first documented in 1981, while others feel it is alive and well.
BVU News and Trends April 2019
A monthly roundup of key developments of interest to business valuation experts.
Latest paper on the vanishing size effect
A new academic paper, “Why Has the Size Effect Disappeared?,” explores the disappearance of the small-firm effect after the early 1980s.
BVU News and Trends March 2019
A monthly roundup of key developments of interest to business valuation experts.
Bygone size effect resurfaces in highly volatile times, per new research
Although most empirical studies find that the size effect has disappeared since the early 1980s, it shows up during times of high macroeconomic volatility, according to a new paper.
Business Valuation Review spotlights the ‘size effect’
If you’re a subscriber to BVResearch Pro, you have access to a vast amount of research material, including the full archive of Business Valuation Review, the journal of the American Society of Appraisers (ASA).
The Absence of a Size Effect Relevant to the Cost of Equity
In this paper, I evaluate whether there is a size effect that is relevant to the cost of equity. I first analyze what model investors use to determine the required rate of return on their investment and find investors prefer the Capital Asset Pricing Model (CAPM) over other models, even those that include a size proxy. I also show that over the period 1981 to 2016, small stocks underperformed large stocks, which is inconsistent with ...
The Size Effect Continues To Be Relevant When Estimating the Cost of Capital
In this paper, I will review the size effect, potential reasons why one observes the size effect, and correct common misconceptions and address criticisms of the Size Premia (SP). Specifically, we demonstrate that the size premium critique by Cliff Ang is not warranted and that the alternative methodology proposed by that author is misleading and cannot be considered as an alternative to the Duff & Phelps’ SP. Subsequently, we will highlight some methodological issues with ...
Size-adjusting Volatility
Since the valuation of corporate securities with option-like features issued by the private companies requires an estimate of volatility based upon comparable public companies and the comparable companies are often larger, the use of unadjusted volatilities may understate the volatility of the subject private company. This article provides an up-to-date research review on the need for size-adjusting volatility. We also present a simple methodology to size adjust comparable companies that is easily updated with data ...
The Size Effect—It Is Still Relevant
Practitioners commonly incorporate a size premium when developing their cost of capital estimates using the modified capital asset pricing model (MCAPM). This article is intended to correct common misconceptions about the size premium and demonstrate that data from recent periods support the continued use of a size premium.
“The small firm risk premium remains largely a myth”
This article is another installment in the long-running debate about whether small companies are riskier than large companies, all other things being equal.
Additional evidence of size difference in market multiples
In my last two editorial columns, I presented evidence that smaller companies tend to sell at lower valuation multiples than do larger companies. The accompanying table is further corroboration of tha ...
Small stock risk premium no myth; size does matter
Until about a year ago, I thought that, on average, the fact that small stocks are riskier than large stocks had been firmly established in the financial community, and that attacks on the "small stoc ...
New book analyzes small business transaction data
Transaction Patterns is a very interesting and useful book for both the business appraiser and the business broker. The data is compiled from the BIZCOMPS database, but similar analysis could be done on The IBA Market Database and Pratt's Stats, and I believe that results would be similar.
Bizcomps "99 National Industrial Study analyzes over 500 small business sales
Bizcomps '99 National Industrial Study , Sanders, Jack R., P.O. Box 711777, San Diego, CA 92171, (619) 457-0366, $105.00, 129 pp., 8 ½" by 11", spiral notebook. This study was developed to give mo ...
Fruitful subjects to research
I am a Ph.D. student at Walden University and wish to study a contemporary problem in business valuation as my dissertation topic. I would appreciate if you could recommend some topics tha ...