Valuing unlisted shares: A dual approach to the major information determinants

Little is known about how professional valuation experts actually form judgements on the value of unlisted shares. This study examines the valuation process among Canadian valuators and the relative importance of each of the main information variables used in that process. A dual approach to the problem is adopted: (1) a major survey of 231 valuation experts and (2) a conjoint analysis experiment on 82 valuators using fabricated cases representative of realistic relationships. Both approaches conclude that while earnings prospects is the single most important factor in determining unlisted share values, the determination of value in the absence of a capital market is a highly complex process involving a host of information variables, many of which do not easily lend themselves to objective judgement.