The Role of Premiums and Discounts in Business Valuation: Evidence from the Italian Context

  •  Olga Ferraro    
  •  Franco Rubino    


The valuation of a (non-totalitarian) shareholding in capital stock is characterized by some critical conditions, which are mainly related to the fact that the transfer or acquisition of the same can determine the transfer of control from one subject to another. It follows that the value of the investment can not simply be equal to the proportional value of the share capital, but should include premiums or discounts. Discounts and premiums do not just affect the value of a company; they play a crucial role in influencing a host of other factors and conditions that can make or break a deal. When it comes to business valuations, it is the business appraiser’s responsibility to be intimately knowledgeable with every aspect of discounts and premiums: the different types, the situations when they may or may not apply, and how to quantify them. The paper has a twofold approach: on the one hand, it analyzes the main reference literature on the definition and characteristics of premiums and discounts and the recognition and quantification of the same; on the other, subsequently, it examines the behavior adopted by the Italian professional practice in recognition and appreciation of prizes and discounts.

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