Small and medium company valuation by discounted cash flow: philosophical and epistemological basis

Authors

DOI:

https://doi.org/10.15381/quipu.v28i57.18473

Keywords:

Acquisitions, cost of capital, finance, cash flow, Mergers, valuation

Abstract

The majority of experts recognizes the cash flow discount as the best technique to value SMEs. However, there is a divergence in the concepts and criteria that a valuation model must incorporate. neoclassical finance, heiress of logical positivism as an epistemological basis, maintains the efficient market hypothesis (EMH) y the capital asset pricing model (CAPM), to calculate the discount rate. On the contrary, behavioral finance, heiress of Husserl's phenomenology, suggests incorporating human behavior or behavior into its valuation models. On taking position, on one way or another, from a philosophical point of view, a valuation model, should lead us to the encounter of truth, justice and fairness in decision making. Both aspects of company valuation, philosophical and epistemological, are addressed in the present research, analyzing the different theories and positions in force, ending with a final position regarding the 2 valuation models of companies currently existing within Neoclassical Finance: the Damodaran Model and the Fernández Model.

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Author Biographies

  • Germán Alfredo Boza Pró, Universidad del Pacífico

    PhD candidate in Business Sciences from UNMSM. Master in Economics and Business Management (MBA) from the IESE Business School of Barcelona, ​​University of Navarra, Spain, as well as a Bachelor of Administration and Bachelor of Accounting from the Universidad del Pacífico. Currently, he is a Scientific Collaborator at IESE and Head Partner at Value Partners, an Investment Banking boutique. He has been Director of Administration and Finance of Grupo Santillana in Peru, Director of Finance and Control of Santander Investment Andean Division -_Perú and Executive of the International Olympic Committee in Spain, as well as Academic Director of the Pacífico Business School, where he is a professor. He is Professor of Finance at CENTRUM Católica, ESAN Graduate School of Business and the Graduate School of the UPC. He has developed his professional activity as Financial Advisor in Investment Banking, Auditing, Corporate Finance and Competitiveness in the Industrial sectors (Poultry, Textile and Apparel, Automotive), Mining and Services (Health, Real Estate, Insurance, Banking, Systems, Publishing and Advertising).

  • Jeri Gloria Ramón Ruffner de Vega, Universidad Nacional Mayor de San Marcos. Lima, Peru

    Certified Public Accountant at the Universidad Nacional Mayor de San Marcos. Master in Accounting with a mention in Auditing and Master in Public Administration with a mention in Anticorruption. Doctor in Accounting, and Lawyer. Past President of the Committee of Experts of the College of Public Accountants of Lima.

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Published

2020-08-31

Issue

Vol. 28 No. 57 (2020)

Section

Review Articles

License

Copyright (c) 2020 Germán Alfredo Boza Pró, Jeri Gloria Ramón Ruffner de Vega

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.

AUTHORS RETAIN THEIR RIGHTS:

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b. Authors retain their right to share, copy, distribute, perform and publicly communicate their article (eg, to place their article in an institutional repository or publish it in a book), with an acknowledgment of its initial publication in Quipukamayoc .

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How to Cite

Boza Pró, G. A., & Ramón Ruffner de Vega, J. G. (2020). Small and medium company valuation by discounted cash flow: philosophical and epistemological basis. Quipukamayoc, 28(57), 95-100. https://doi.org/10.15381/quipu.v28i57.18473