Estimates of Business Value
The evidence on the market value of specific businesses varies widely, largely depending on reported market transactions in the equity of the firm. A fraction of businesses are "publicly traded," meaning that their equity can be purchased and sold by investors in stock markets available to the general public. Publicly traded companies on major stock markets have an easily calculated "market capitalization" that is a direct estimate of the market value of the firm's equity. Some publicly traded firms have relatively few recorded trades (including many firms traded "over the counter" or in "pink sheets"). A far larger number of firms are privately held. Normally, equity interests in these firms (which include corporations, partnerships, limited-liability companies, and some other organizational forms) are traded privately, and often irregularly.
A number of stock market indicators in the United States and other countries provide an indication of the market value of publicly traded firms. The Survey of Consumer Finance in the US also includes an estimate of household ownership of stocks, including indirect ownership through mutual funds. The 2004 and 2007 SCF indicate a growing trend in stock ownership, with 51% of households indicating a direct or indirect ownership of stocks, with the majority of those respondents indicating indirect ownership through mutual funds. Few indications are available on the value of privately held firms. Anderson (2009) recently estimated the market value of U.S. privately held and publicly traded firms, using Internal Revenue Service and SCF data. He estimates that privately held firms produced more income for investors, and had more value than publicly held firms, in 2004.
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