Factors affecting the selling prices of small firms

58 percent of the jobs in the United Stated are created by firms with fewer than 500 employees (Davis, et al. [1998]). Yet, there is only limited research done on the industry trends and conditions affecting small company sale transactions. The small business industry has very different dynamics compared to the large public companies. Based on my findings, small businesses have significantly lower price-to-earning ratios compared to large companies. In this paper, I study the economic conditions affecting small firms and variables that affect the selling prices of these companies. I show that there exists a strong informational asymmetry between the buyers and sellers of small companies that lower the transaction prices. I also show that market illiquidity and contingent contracts can impact the selling prices of small companies.

Department dc:contributor.department

Massachusetts Institute of Technology. Dept. of Electrical Engineering and Computer Science.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2008

Author dc:creator

• Somervuo, Timo J. (Timo Juhani)

Advisor dc:contributor.advisor

• Antoinette Schoar.

• Electrical Engineering and Computer Science.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/46490

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/46490