TY - GEN
T1 - Factors Affecting Discount for Lack of Liquidity in Business Valuation
AU - Saksonova, Svetlana
AU - Abramishvili, Neli
AU - Antonova, Marina
AU - Katalkina, Oksana
N1 - Publisher Copyright:
© 2022, The Author(s), under exclusive license to Springer Nature Switzerland AG.
PY - 2022
Y1 - 2022
N2 - Estimating the size of discounts for the lack of liquidity in determining business value and factors influencing it represent the fundamental challenge for business valuation. The relevance of this article rests in the fact that the findings can be utilised to gain a better knowledge of the impact of the liquidity factor on business valuation, as well as the factors that influence the amount of the liquidity discount. The purpose of this paper is to discover the factors that influence the amount of discounts for lack of liquidity, as well as to examine the amount of discounts that are directly related to insufficient liquidity of share blocks. To achieve the purpose of the paper the following tasks have been set: to analyse existing studies on discounts for the lack of liquidity, to reveal factors’ significance determining the amount of discounts, to analyze Russian mergers and acquisitions (M&A) market for 2016–2018, to conduct analysis of information for each specific transaction, to calculate one share price sold as a part of a specific block, and calculate the premium or discount for a given block size. The research is methodologically based on the analysis of academic sources, integration, and comparison of statistical data. Information on M&A deals from 2016 to 2018 was collected and analysed to determine the average discount amount on the example of the Russian market. A final sample consists of only 50 transactions, for which all the necessary information was found. When considering deals with discounts in the study, the average and median for the discounts are not large, but, however, in some cases, their size reaches 10–11% of the initial price of the package, which indicates that discounts can change the value of a business or a block of shares seriously. The authors’ suggestions are intended at business owners in emerging countries, with the goal of concentrating efforts on improving the key variables that influence the amount of the potential liquidity discount.
AB - Estimating the size of discounts for the lack of liquidity in determining business value and factors influencing it represent the fundamental challenge for business valuation. The relevance of this article rests in the fact that the findings can be utilised to gain a better knowledge of the impact of the liquidity factor on business valuation, as well as the factors that influence the amount of the liquidity discount. The purpose of this paper is to discover the factors that influence the amount of discounts for lack of liquidity, as well as to examine the amount of discounts that are directly related to insufficient liquidity of share blocks. To achieve the purpose of the paper the following tasks have been set: to analyse existing studies on discounts for the lack of liquidity, to reveal factors’ significance determining the amount of discounts, to analyze Russian mergers and acquisitions (M&A) market for 2016–2018, to conduct analysis of information for each specific transaction, to calculate one share price sold as a part of a specific block, and calculate the premium or discount for a given block size. The research is methodologically based on the analysis of academic sources, integration, and comparison of statistical data. Information on M&A deals from 2016 to 2018 was collected and analysed to determine the average discount amount on the example of the Russian market. A final sample consists of only 50 transactions, for which all the necessary information was found. When considering deals with discounts in the study, the average and median for the discounts are not large, but, however, in some cases, their size reaches 10–11% of the initial price of the package, which indicates that discounts can change the value of a business or a block of shares seriously. The authors’ suggestions are intended at business owners in emerging countries, with the goal of concentrating efforts on improving the key variables that influence the amount of the potential liquidity discount.
KW - Block of shares
KW - Business value
KW - Factors
KW - Liquidity
KW - Premiums
UR - https://link.springer.com/chapter/10.1007/978-3-030-96196-1_48
UR - https://www.scopus.com/pages/publications/85126203430
U2 - 10.1007/978-3-030-96196-1_48
DO - 10.1007/978-3-030-96196-1_48
M3 - Conference paper
SN - 9783030961954
VL - 410 LNNS
T3 - Lecture Notes in Networks and Systems
SP - 524
EP - 535
BT - Reliability and Statistics in Transportation and Communication - Selected Papers from the 21st International Multidisciplinary Conference on Reliability and Statistics in Transportation and Communication, RelStat2021
A2 - Kabashkin, Igor
A2 - Yatskiv, Irina
A2 - Prentkovskis, Olegas
PB - Springer
CY - Cham
ER -