Oceňování 2021, 14(1):3-24 | DOI: 10.18267/j.ocenovani.256

A short review of literature on basics of relation between lack of marketability and security prices

Tomáš Buus
Ing. Tomáš Buus, Ph.D. - odborný asistent; Katedra financí a oceňování podniku, Fakulta financí a účetnictví, Vysoká škola ekonomická v Praze, nám. W. Churchilla 4, 130 67 Praha 3, Česká republika

A number of studies and textbooks in the field of corporate valuation and corporate finance consider or prove the liquidity of shares in corporations as an important factor in value, resp. stock prices. Despite the urgency of this problem, only scarce information is available in the Czech literature on company valuation about the principles of applying the discount for lack of marketability (DLOM) and its size. This article provides an overview of the literature describing the basic relationship between liquidity (more precisely, public marketability) and the share price. A critical look at the results of empirical studies and theoretical models of this so-called illiquidity discount shows a number of challenges for its further research and also that its application not only in Czech conditions, of which most DLOM studies do not come (and therefore not locally common), but even in the home United States, there may be strong doubts as to whether the presented discounts include only the effect of illiquidity. Last but not least, this paper documents the development of marketability discount theory and empirically observed discount values.

Keywords: Lack of marketability discount; Restricted stocks; Pre-IPO; Options
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Článek je zpracován jako jeden z výstupů výzkumného projektu Fakulty financí a účetnictví VŠE Praha, který je realizován v rámci institucionální podpory VŠE IP100040.

JEL classification: D46, G12, G34

Published: August 24, 2021  Show citation

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Buus, T. (2021). A short review of literature on basics of relation between lack of marketability and security prices. Oceňování, 14(1), 3-24. doi: 10.18267/j.ocenovani.256
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