"Firm Value and Marketability Discounts"

      BY:  MUKESH BAJAJ
              Law and Economics Consulting Group (LECG), Inc.
              University of California at Berkeley
              Haas School of Business
           DAVID J. DENIS
              Purdue University
           STEPHEN P. FERRIS
              University of Missouri at Columbia
           ATULYA SARIN
              Santa Clara University
              Dept. of Finance

    Date:  Febuary 26, 2001
 

ABSTRACT:
 The marketability of an asset refers to the degree to which an asset can be converted to cash quickly, without incurring large transactions costs or price concessions. All else equal, the more marketable an asset, the higher the price an investor will be willing to pay for the asset. The lack of marketability of an asset is costly to investors because it potentially causes the investor to miss opportunities to allocate capital to alternative uses, such as liquidity or portfolio rebalancing.

 In this article we review and critique the various methods that appear in the literature and are used in practice to estimate valuation discounts when an asset lacks marketability. We also present findings from our own original empirical research which offer further insights into the estimation of such discounts.


Document:  Available from the SSRN Electronic Paper Collection:
           http://papers.ssrn.com/paper.taf?abstract_id=262198

           Other Electronic Document Delivery:
           http://business.scu.edu/asarin
           SSRN only offers technical support for papers
           downloaded from the SSRN Electronic Paper Collection
           location. When URLs wrap, you must copy and paste
           them into your browser eliminating all spaces.

Contact:  MUKESH BAJAJ
   Email:  Mailto:Mukesh_Bajaj@lecg.com
  Postal:  Law and Economics Consulting Group (LECG), Inc.
           2000 Powell Street, Suite 600
           Emeryville, CA 94608  USA
   Phone:  510-450-6736
 Co-Auth:  DAVID J. DENIS
   Email:  Mailto:daviddenis@mgmt.purdue.edu
  Postal:  Purdue University
           Krannert Graduate School of Management
           West Lafayette, IN 47907-1310  USA
 Co-Auth:  STEPHEN P. FERRIS
   Email:  Mailto:ferris@missouri.edu
  Postal:  University of Missouri at Columbia
           214 Middlebush Hall
           Columbia, MO 65211  USA
 Co-Auth:  ATULYA SARIN
   Email:  Mailto:asarin@scu.edu
  Postal:  Santa Clara University
           Dept. of Finance
           Leavey School of Business and Administration
           Santa Clara, CA 95053  USA