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This article reviews the way in which the law in England and Wales considers the valuation of companies, and argues that the issues arising from this legal perspective are indicative of a gap between the economic theory and practice of company valuation. Furthermore, an analysis of the relevant case law reveals several interesting practical difficulties which may suggest a role for theoretical analysis. Equally, a lack of awareness of the economic theory of valuation is revealed on the part of the courts. It is argued that this lack of awareness may have implications for the practices of valuation by professional accounting firms that are currently observed in the UK. An examination of the theory of company valuation shows that there is widespread agreement on the basic principle of the approach to be followed in valuing the shares in a company; in short, it is the present value of the company's future cash flows. Although there is debate over issues such as the appropriate model to be used in pricing risk, and how to allow for the impact of taxation in arriving at the discount rate, this principle appears to be universally accepted. Although some investigations have been carried out into the practical context of company valuation in the UK (Arnold and Moizer 1984, Moizer and Arnold 1984, Day 1986, and Keane 1992), no attention has been paid in the economics and accounting literature to the legal context. This is perhaps surprising given that the courts are sometimes important users of company valuation reports. This article reviews the way in which the law in England and Wales considers the valuation of companies, and argues that the issues arising from this legal perspective are indicative of a gap between the economic theory and practice of company valuation. Furthermore, an analysis of the relevant case law reveals several interesting practical difficulties which may suggest a role for theoretical analysis. Equally, a lack of awareness of the economic theory of valuation is revealed on the part of the courts. Historically, one of the features of the English commercial courts has been their refusal to become involved in matters of commercial judgement. English judges have held themselves to be sophisticated technicians in law but self‐professed amateurs in commercial matters. Their role has been to hear expert witnesses and to weigh up their professional advice. This contrasts with the position in continental courts; for example in France, the judges sitting at first instance in the lower commercial courts are businessmen and women rather than lawyers, with the result that their approach and findings are likely to be less legalistic and more commercial. This English legal approach needs to be seen in the context of an increasing concern with valuation attributable to the changes brought about by Sections 459 to 461 of the Companies Act 1985, together with the recent case law. Section 459 of the Act is concerned with minority unfair prejudice actions and under that section a member may petition the court for an order on the grounds that the petitioner's interests have been, are being or will be unfairly prejudiced by the conduct of the company's affairs. A considerable body of case law has built up on what constitutes unfairly prejudicial conduct. Under section 461 the court may make such order as it thinks fit for giving relief including the purchase of the shares of any member of the company by other members or by the company itself. Here the crucial question for the courts and for the parties negotiating a buy‐out in the shadow of the courts is the amount of the valuation and the factor to be taken into account in reaching that valuation. In such circumstances, it might be expected that there would be considerable concern with the basis of the valuation. However, ‘basis’ can have several different meanings; in the first place, it could be defined as asset basis, in the sense that a valuation may be concerned with the replacement, ‘going concern’ or realisable value of the firm's assets. Second, there is a need to define what economic model has been used to derive the ‘going concern’ or economic value; it may be helpful to describe this as the economic model basis of the valuation. Third, there is the question as to whether the proportion of the equity held affects the value; this might be termed the control basis. As we show below, the concern of the theoretical literature is primarily with the second category, whereas the case law tends to concern itself with the first and third categories. In order to clarify the theoretical and practical considerations involved, the first section of this paper briefly reviews the theory of equity valuation and the second contrasts this with the rather limited evidence on UK valuation practice. In the third section, the legal issues involved are explained and the way in which the courts proceed in cases which involve the valuation of shares are reviewed. Although the courts rely on expert evidence in making a valuation, certain principles and guidelines for valuation are laid down by the courts, and these are analysed and contrasted with the prescriptions on valuation found in the finance literature.

In the last few years a number of large operational companies in the United Kingdom have chosen to segregate the management of their property holdings from the day‐to‐day running of their core business. This has either been achieved by forming property sections within the main company structure, or in some cases the hierarchy has been more clearly defined by the formation of subsidiary companies feeding into the parent company. The operational arm would then pay the property subsidiary an open market rental for each property that they occupy. The advantage of separating the property function from the core business is twofold. First, it allows the performance of each operational outlet to be measured on the same basis; and second, the investment performance of the properties themselves can now be measured. However, for the latter to occur, the properties need to be valued as investments and not as owner occupied. Under current RICS regulations this is not allowed and any property subject to an inter‐company let must be valued as if the lease agreement did not exist. Investigates the effect of the RICS guidelines on the valuation of properties let to related companies and highlights the problems of measuring the performance of the company′s property assets against a suitable benchmark.

The purpose of this study is to showcase that the valuation of startups is still considered to be more “art than science”. Moreover, such non-rigorous approaches often lead to valuations, which turn out to be too high, which in turn has become a well-known phenomenon to a broader audience due to shining examples such as We Work. This is reason enough to revisit the important topic of where we stand today with startup valuation procedures and methodologies.

Literature synthesis and exploratory analysis.

While some studies describe sound results about how to assess startups, what the authors found was that many questions remain open or have not been covered at all. This is the reason why the authors needed to apply a substantial amount of reasoning in the analysis of studies, which do not exactly deal with startup companies. The authors provided some interesting impulses for future research.

Based on an original overview of the current state of research about the valuation of startup companies, this paper makes the following principal contribution to both the literature and practice: on the one hand, the authors assess four impact factors on startup values critically; on the other, the authors provide an outlook on promising future research avenues.

In capital market, share prices of listed companies generally respond to accounting information. In 1995, Ohlson proposed a share valuation model based on two accounting indicators: company residual income and book value of net asset. In 2000, Zhang introduced the thought of option pricing and developed a new accounting valuation model. The purpose of this paper is to investigate the valuation deviation and the influence of some market transaction characteristics on pricing models.

The authors use listed companies from 1999 to 2013 as samples, and conduct comparative analysis with multiple regression.

The main findings are: first, the accounting valuation model is applicable to the capital market as a whole, and its pricing effect increases as years go by; second, in the environment of out capital market, the maturity of investors is one of important factors that causes the information content of residual income less than that of profit per share and lower pricing effect of valuation models; third, when the price earning (PE) of listed companies reaches certain level, the overall explanation capacity of accounting valuation models will become lower as PE gets higher; fourth, as for companies with higher turnover rate and more active transaction, the pricing effect of accounting valuation model is obviously lower; fifth, the pricing effect of accounting valuation models in a bull market is lower than in a bear market.

These findings establish connection between accounting valuation and market transaction characteristics providing an explorable orientation for the future development of accounting valuation theories and models.

The purpose of this paper is to value the patents of pharmaceutical companies using discounted cash flows, and compare the value-relevance of these assets against alternative intangible asset measures such as reported intangible assets and R & D capital.

The study values pharmaceutical intangibles using three methods: an income method; the sum of unamortised R & D expenditures; the firm’s reported intangible assets. Value-relevance tests use ordinary least squares regression and Vuong and Clarke tests.

First, the study finds that the discounted cash-flow valuation of pharmaceutical patents is value-relevant. Second, the value of pharmaceutical patents explains market value better than reported intangible assets but not R & D capital. However, the valuation of pharmaceutical patents is more consistent with the risks of R & D than the valuation of R & D capital which assumes recovery of R & D expenditure.

This is the first known study that values patents using an income method and compares those valuations with reported intangible assets and R & D capital valuation models.

This paper aims to investigate the relationship between environmental performance and management and company valuation. With a specific focus on company valuation, this study shows how a firm’s environmental activities, including its environmental management practices, are perceived and valued by its stockholders.

Newsweek’s green ranking data between 2014 and 2016 were used to support this analysis. Environmental performances and environmental management practices of 345 Fortune 500 companies from various industries were included in the data set.

The analysis finds higher valuations for US companies that are more efficient in managing greenhouse gas emissions. In addition, it empirically shows that investors place a higher value on companies with the following environment-related management policies: initiatives that reward top management for achieving environmental goals and third-party auditing of environmental performance.

By incorporating corporate environmental management practices as an additional environmental performance criterion, this research fills a gap in the literature on the potential relationship between corporate environmental performance and company valuation.

Private company investors operate in unique environments. Seed equity investors, which generally include venture capitalists and angel investors, often have the particularly unusual role of becoming involved in the oversight of the investee company. This continuing involvement with the investee firm introduces conflicting interests: the desire to maximize the profit from the investment, but also the desire to maintain a positive relationship with the entrepreneur(s) (consistent with the theory of upper echelons/strategic management). We discuss in detail this unusual investment context and the role that accounting disclosures can have in this environment. We predict that accounting disclosures can influence the tradeoff between the profit motive and the relationship motive. Using 64 experienced angel investors as participants in a realistic experimental setting, we find that disclosures indicating conservatively biased accounting choice and lower account risk (variance) lead to angels increasing the valuation of the target firm and forgoing higher profits. Increasing the valuation serves to foster the relationship with the entrepreneur(s). Our findings have implications for entrepreneurs making choices about discretionary disclosures and for standard setters; we also inform theory related to overcoming anchoring.

Building on the venture capital (VC) literature, this paper aims to study the impact of the value added by corporate venture capitalists (CVCs) on their funded companies by comparing its IPO valuation with its independent venture capitalists (IVCs) peers.

This study uses a sample of 3,719 VC-backed ventures, between the years 1998 and 2020. The empirical analysis focuses on the propensity score matching approach, pairing ventures based on their probability of being funded by CVCs, and consequently, interpret the results derived from the valuation multiple ratios between the “nearest neighbors.”

This study finds that companies funded by CVCs can achieve higher valuations at their IPO compared to IVC-backed companies. Moreover, CVC-backed companies outperformance is mainly driven by startups which hold a technological fit with their CVC investor, with higher technological overlaps being translated into more significant valuations.

This study presents systematic evidence to the subject concerning ventures’ type of investors and its effect on the startups’ IPO valuations.

This paper contributes to the enrichment of the industry’s literacy while also easing entrepreneurs’ decisions when choosing a funding partner. CVCs offer a variety of services and support that fits the specific needs of their funded companies.

To the best of the authors’ knowledge, this study is among the first to examine the role of CVCs as a tool to help venture growth.

The purpose of this paper is to provide evidence about the role of the geography on agri-food firms’ valuations. The goal is to test clusters and agglomeration effects on the SMEs valuations.

The authors propose an empirical test applying a spatial regression analysis on a sample constitute by 306 agri-food SMEs located in two municipalities with different economic characteristics: Murcia and Madrid. In addition, the authors applied the discounted cash flow model in order to estimate the SMEs’ economic value.

The findings show the importance of the geography variables on the SMEs’ performances highlights interesting differences between territories. In particular, the results confirm that the geographical proximity between agri-food firms and between them and external agents is significant on firms’ valuations. The agglomeration effects are verified in both municipality but the density variable present a negative non-linear effect confirming previous studies which indicates that the existence of a large number of firms 05 rise competition, decreasing the economic opportunities of these companies.

This study gives interesting insights to policymakers, researchers and practitioners concerning the importance of the relationships among agents, also favoured by a developed infrastructures system in a fully connected environment.

The chapter provides a practical guide to identify and define different funding sources for entrepreneurial and innovation endeavors, including a methodology to describe return on investment expectations from funding sources. Also, the authors provide recommended key performance indicators and valuation methods when pitching to potential investors.