Économie et Statistique n° 366 - 2003 Job Insecurity: Has the Protective Role of Seniority Diminished in France? - Intragenerational Redistribution and the Private-Sector Employees' Pension Scheme - Financial Intermediaries - An estimate of the Market value of Unlisted Shares
An estimate of the market value of unlisted shares
Unlisted shares are, by definition, not valued on the stock market. Their market value therefore needs to be estimated. However, the estimating methods usually used, especially the application of listed companies' price-to-book ratios a stock's market value divided by its book value to unlisted companies, remain unsound. The INSEE survey on financial links between companies is used to obtain a direct valuation of a subsidiary's unlisted shares based on the share value on the parent company's balance sheet. A valuation of the subsidiary is then obtained by dividing this value by the subsidiary's holding rate. However, as direct as this valuation may be, it must be validated as a market value. For the listed companies, the valuation is comparable to their market capitalisation. For the others, the price-to-book ratio calculated is sensitive to economic determinants such as profitability and the distribution of dividends. However, the reference to the listed companies remains the international system of national accounts (SNA93) norm, if only for the sake of international comparability. The valuations calculated here are used to select categories of listed companies similar to unlisted companies and to propose an estimate of the liquidity premium to be applied to make the transition from listed to unlisted companies. This method will be taken into account when the national accounts are revised (base 2000).