Empirical Study Of The Liquidity Discount In Equity Value Assess Of Private Company

In recent years, non-listed companies trading cases occur frequently because ofmany reasons, including cyclical fluctuations in the global economy, the impact of theimplementation of the global strategy of multinational and domestic industrialrestructuring, the company’s own strategic restructuring, mergers and acquisitions andother multiple factors. Based on the company equity value assessment methodology toassess the value of non-listed companies, the practice of continuous improvement inthe assessment, and the inclusion of the issue of the liquidity discount."BusinessValuation Guidance (Trial)" pointed out that the implementation of enterprisevaluation CPV business should consider the impact of mobility on the assessment ofthe object under appropriate and practicable.First,this article explains what is equity liquidity discount. Liquidity discountoptions are part of the equity liquidity inflated deductions. In order to analyze thesubstance of the inflated portion of the equity of unlisted companies, the article to therealizable value of equity trading analysis as a starting point,draw a narrowdifferences on non-listed companies and listed companies to realize the value thatmobility value(LVA)part,generalized In addition to differences in value addedmobility also includes transaction cost differences,differences in bargaining powerbetween buyers and sellers.On the basis of assumptions, this paper studies thenon-listed company equity liquidity discount using a narrow difference inconnotation.Secondly, this paper analyzes the application of equity liquidity discount causesand appropriate. Equity valuation of unlisted companies assessed is the intrinsic valueof the equity. In applying the equity method to the market value of non-listedcompanies were analyzed to assess the results of the use of the listed companyappraiser data regression model out of the earnings or book value,taking dataconsidered to be evaluated, the data is based on listed adjust the contrast of the results of the flow situations,the presence of embedded value added mobility part,notnon-listed companies.Thus in assessing the market value of unlisted equity methodmust be adjusted liquidity discount.Third, the paper explained the liquidity measure and calculate the discount theidea.Unlisted equity value of the underlying liquidity discount is embedded value andthe value of mobility and which methods to assess the results and equity markets havethe same connotation assessment. The results of equity income method and costmethod showed only the intrinsic value of the equity. Therefore, in assessing the valueof equity of unlisted companies, the income approach and cost approach withoutconsidering narrowly defined herein liquidity discount, and market approach must bededicated liquidity discount adjustments.Unlisted company equity liquidity discount rate (ξ) is composed of twodifferent parts of the discount rate by the flow (ξ1) and block trades discount rate (ξ2). Just listed shares, after the first day of the opening transition from the non-listedcompany is a listed company, the intrinsic value per share before and after the listingof the base did not change, but with a clear appreciation of liquidity, we use thisfeature of IPO to measure differences in circulation discount ξ1unlistedcircumstances. ξ1measure from "(secondary market trading price-IPO price)/secondary market trading price "; ξ2from " normal stock trading block trading day ’sclosing price-a block trade price)/normal trading block trading day closing stockprice" measure.Finally,selecting appropriate data for the recent liquidity discount rate empiricalestimation and validation.To achieve a non-listed company on the recent liquiditymeasure of the level of the discount rate, select the2014listing of48new shares forempirical analysis, the results ξ1include:①narrow opening on the first day of theliquidity discount average of16.51%;②narrow liquidity discount based on theaverage closing price on the first day of29.66%;③after the listing of the first25onthe narrow liquidity discount price average of35.34%;④based on the first ten days after the listing narrow liquidity discount price average of40.36%. Authors believethat after the IPO game10trading days after the trading, speculative investorsrelatively weakened motivation, shares more reasonable valuation, and thus non-listedcompanies based on the first ten days after the listing of the calculated averageliquidity discount more accurate. In addition, selected184cases large transactionsbetween January14,2014to February10,2014, can be regarded as an average valueof6.09%ξ2. Eventually be considered non-listed company equity liquidity discountof46.45%, and verify that this value through a non-listed company’s equity tradingCD case with valuation accuracy.