In:
Journal of Business Valuation and Economic Loss Analysis, Walter de Gruyter GmbH, Vol. 10, No. 1 ( 2015-01-1), p. 1-43
Abstract:
The significant failure rates observed in mergers and acquisitions (M & A) indicate structural deficiencies in business transactions. This paper identifies serious weaknesses in common valuation methods that play a key role in poor transaction practice. Common valuation methods are in particular discounted cash flow (DCF) methods. DCF methods are usually based on neo-classical theories that assume the existence of a perfect and complete capital market. As will be demonstrated, the underlying theoretical patchwork is contradictory and lacks utility. Therefore, utilizing DCF methods to value a business and deduce economic decisions from such a valuation is decision-making built on sand. Following a normative-deductive methodology, this paper seeks an alternative theoretical concept to build a business valuation theory on solid ground. Such an alternative is found in the Austrian School of thought. The resulting valuation concept, subjective business valuation theory , is based on the theory of marginal utility proposed by Gossen, which was rediscovered and refined by the scholars of the early Austrian School. Contrary to highly restrictive neo-classical valuation, subjective business valuation approaches reality and is therefore well-suited for practical implementation.
Type of Medium:
Online Resource
ISSN:
2194-5861
,
1932-9156
DOI:
10.1515/jbvela-2014-0001
Language:
Unknown
Publisher:
Walter de Gruyter GmbH
Publication Date:
2015
detail.hit.zdb_id:
2263346-7
SSG:
3,2
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