Undergraduate Economic Review
Abstract
Examination of prior research suggests that affiliated sell-side analysts are subject to conflicts of interest that cause them to issue optimistically biased stock recommendations for investment banking clients. Using a sample of public technology companies, I find that analysts have a theoretical discrepancy of up to 26% when valuing companies using a discounted cash flow model, and a 19-22% theoretical discrepancy when using comparable company analysis. I showcase how conventional valuation methodologies can allow sell-side analysts significant leeway that can be used to further unethical agendas and draw conclusions around the usefulness of regulatory intervention in the financial services industry.
Recommended Citation
Twomey, Peter
(2017)
"The Wall Street Gap: A Theoretical Analysis of Company Valuation Discrepancy,"
Undergraduate Economic Review: Vol. 14:
Iss.
1, Article 15.
Available at:
https://digitalcommons.iwu.edu/uer/vol14/iss1/15
Included in
Business Law, Public Responsibility, and Ethics Commons, Corporate Finance Commons, Finance and Financial Management Commons