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Equity valuation: A survey of professional practice

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  • Jerald E. Pinto
  • Thomas R. Robinson
  • John D. Stowe

Abstract

This paper reports the results of a scientific survey of the equity valuation practices of CFA Institute members with equity analysis job responsibilities. Using an instrument designed to minimize biases in prior valuation surveys and sampling a larger group than in previous studies (13,500 investment professionals, resulting in 1,980 valid completed questionnaires), this paper documents professional practices in the selection of equity valuation approaches, including specific model variations and key input preferences. Important differences in practice were observed across geographies and employer firm types.

Suggested Citation

  • Jerald E. Pinto & Thomas R. Robinson & John D. Stowe, 2019. "Equity valuation: A survey of professional practice," Review of Financial Economics, John Wiley & Sons, vol. 37(2), pages 219-233, April.
    • Handle: RePEc:wly:revfec:v:37:y:2019:i:2:p:219-233
    DOI: 10.1002/rfe.1040
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    1. Franck Bancel & Usha R. Mittoo, 2014. "The Gap between the Theory and Practice of Corporate Valuation: Survey of European Experts[We are ext]," Journal of Applied Corporate Finance, Morgan Stanley, vol. 26(4), pages 106-117, December.
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    5. Merton H. Miller & Franco Modigliani, 1961. "Dividend Policy, Growth, and the Valuation of Shares," The Journal of Business, University of Chicago Press, vol. 34, pages 411-411.
    6. Shahed Imam & Richard Barker & Colin Clubb, 2008. "The Use of Valuation Models by UK Investment Analysts," European Accounting Review, Taylor & Francis Journals, vol. 17(3), pages 503-535.
    7. John Graham & Campbell Harvey, 2002. "HOW DO CFOs MAKE CAPITAL BUDGETING AND CAPITAL STRUCTURE DECISIONS?," Journal of Applied Corporate Finance, Morgan Stanley, vol. 15(1), pages 8-23, March.
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    Cited by:

    1. Stephen Penman, 2016. "Valuation: The State of the Art," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 17(1), pages 3-23, April.
    2. Syed Babar Ali & Manzoor A.Khalidi, 2020. "Valuation of Equity Securities, Private Firms, and Startups," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 16(1), pages 125-140.
    3. Olbert, Lars, 2024. "Identifying gaps between research results and education," Journal of Accounting Education, Elsevier, vol. 66(C).
    4. Stephen Penman, 2016. "Valuation: Accounting for Risk and the Expected Return," Abacus, Accounting Foundation, University of Sydney, vol. 52(1), pages 106-130, March.
    5. Syed Babar Ali & Manzoor A.Khalidi, 2020. "Valuation of Equity Securities, Private Firms, and Startups," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 16(1), pages 16-19.
    6. Nyanine Chuele Fonou Dombeu & Bomi Cyril Nomlala, 2023. "Earnings Quality Research: Trend, Recent Evidence and Future Direction," International Review of Management and Marketing, Econjournals, vol. 13(5), pages 1-8, September.
    7. Laurion, Henry & Sloan, Richard, 2022. "When does forecasting GAAP earnings entail unreasonable effort?," Journal of Accounting and Economics, Elsevier, vol. 73(1).
    8. Roberto Moro-Visconti & Salvador Cruz Rambaud & Joaquín López Pascual, 2020. "Sustainability in FinTechs: An Explanation through Business Model Scalability and Market Valuation," Sustainability, MDPI, vol. 12(24), pages 1-24, December.
    9. Rojo-Ramírez, Alfonso & Palomino Rubio, César Augusto & García Pérez de Lema, Domingo & González Benítez, José Domingo & Mayorga Sanchez, Jose Zacarias & Alba Suárez, Miguel Antonio, 2019. "La tasa de descuento en el proceso de valoración de empresas: un estudio empírico en Colombia," Small Business International Review, Asociación Española de Contabilidad y Administración de Empresas - AECA, vol. 3(1), pages 19-35, January.

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