The Economics of Business Valuation : Towards a Value Functional Approach

For decades, the market, asset, and income approaches to business valuation have taken center stage in the assessment of the firm. This book brings to light an expanded valuation toolkit, consisting of nine well-defined valuation principles hailing from the fields of economics, finance, accounting, taxation, and management. It ultimately argues that the "value functional" approach to business valuation avoids most of the shortcomings of its competitors, and more correctly matches the actual motivations and information set held by stakeholders. Much of what we know about corporate finance and mathematical finance derives from a narrow subset of firms: publicly traded corporations. The value functional approach can be readily applied to both large firms and companies that do not issue publicly traded stocks and bonds, cannot borrow without constraints, and often rely upon entrepreneurs to both finance and manage their operations. With historical side notes from an international set of sources and real-world exemplars that run throughout the text, this book is a future-facing resource for scholars in economics and finance, as well as the academically minded valuation practitioner. For Decades, The Traditional Approaches To Business Valuation (market, Asset, And Income) Have Taken Centre Stage In The Assessment Of The Firm. This Book Presents An Expanded Valuation Toolkit, Consisting Of Nine Well-defined Valuation Principles Hailing From The Fields Of Economics, Finance, Accounting, Taxation, And Management. It Ultimately Argues That The 'value Functional' Approach To Business Valuation Avoids Most Of The Shortcomings Of Its Competitors, And More Correctly Matches The Actual Motivations And Information Held By Stakeholders. Modern Value Quandaries -- Methods And Theories Of Value -- The Failure Of The Neoclassical Investment Rule -- The Nature Of The Firm -- The Organization And Scale Of Private Business -- Accounting For The Firm -- Value In Classical Economics -- Value In Neoclassical Economics -- Modern Recursive Equilibrium And The Basic Pricing Equation -- Arbitrage-free Pricing In Complete Markets -- Portfolio Pricing Methods -- Real Options And Expanded Net Present Value -- Traditional Valuation Methods -- Practical Application Of The Income Method -- The Value Functional : Theory -- The Value Functional : Applications -- Applications : Finance And Valuation -- Applications : Law And Economics. Patrick L. Anderson. Includes Bibliographical References And Index. Contents Preface Part I: Theories of Value Chapter 1. Modern Value Quandaries Chapter 2. Theories of Value Chapter 3. The Failure of the Neoclassical Investment Rule Part II: The Nature of the Firm Chapter 4. The Nature of the Firm Chapter 5: The Organization And Scale of Private Business Chapter 6: Accounting for the Firm Part III: Economic Theories Of Value Chapter 7: Value In Classical Economics Chapter 8: Value In Neoclassical Economics Chapter 9: Modern Recursive Equilibrium and the Basic Pricing Equation Part IV: Finance Theories Of Value Chapter 10: Arbitrage-Free Pricing In Complete Markets Chapter 11: Portfolio Pricing Methods Chapter 12: Real Options and Expanded Net Present Value Part V: Traditional And Value Functional Theories of Value Chapter 13: Traditional Valuation Methods Chapter 14: Practical Application of the Income Method Chapter 15: The Value Functional: Theory Part VI: Applications Chapter 16: The Value Functional: Applications Chapter 17: Applications: Finance and Valutation Chapter 18: Applications: Law and Economics Part VII: Appendices Appendix A: Key Formula and Notation Summary Appendix B: Guide to the Solutions Manual Appendix C: Description of Subject Companies Notes References Index This book brings to light an expanded valuation toolkit, ultimately arguing that the "value functional" approach to business assessment avoids most of the shortcomings of its competitors, and more correctly matches the actual motivations and information set held by stakeholders in a business valuation.