Footnote:
In: Uniform Commercial Code Law Journal
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments March, 23 2012 erstellt
Description:
This study employs a structured, positive approach to investigating the choices of financial analysts for valuation models in their reports on firms drawn from the banking and pharmaceutical sectors in UK. It examines 141, sell-side analysts’ equity reports issued by international brokerage houses, covering 9 banking and 15 pharmaceutical firms listed on the London Stock Exchange. It provides a descriptive analysis of the range of valuation models appearing in these reports and the factors that drive analysts’ choices. It postulates and tests four, discrete hypotheses related to their preferences for specific valuation methods and the variations of these across the two sectors. The statistical analysis performed on these hypotheses leads to the following conclusions: firstly, valuation by single-period comparatives is more often in the banking than the pharmaceutical industry. The valuation models financial analysts most often adopt as dominant are the PE multiple and the multi-period DCF model. Analysts do not include dividends in the value-relevant features of banking firms they seek to predict and base their valuations on; the dividend yield along with the DDM and GGM models only seldom appear as dominant in analysts’ banking reports. Finally, the different nature of assets comprising the firms of the two sectors does not seem to induce a variation in the methodologies analysts adopt when valuing them; it is their expertise as well as investors’ familiarity with certain valuation models that appear to lead their choices instead. These findings shed additional light on the available knowledge on this topic area so far and constitute the basis for further and deeper research on analysts’ valuation methodologies