The vast majority of businesses in the United States are privately held, and approximately 99 percent meet a common government definition of “small.” However, we know surprisingly little about the market values of these organizations. In this paper, we estimate the market value of privately held firms in the United States from sources on earnings, assets, and reported market value of multiple forms of business entities, including corporations, partnerships, LLCs, and sole proprietorships. We discuss various theoretical and practical methods of valuing assets, including those arising from economics, neoclassical finance, portfolio theory, and tradition. Concluding that most of them are not appropriate for valuing private firms, we use insights from dynamic programming and ratio analyses from traditional technique to produce a new estimate based on reported taxable earnings, net worth, and tax filing status. Using this approach, we estimate that privately held U.S. firms had earnings that exceeded those of publicly held firms in two recent years by a significant margin. Moreover, the market value of these firms exceeded that of publicly traded firms. We also conclude that policymakers, perhaps grossly, underestimate the true scale of “small” and privately held firms in the economy.
Information on Business Economics as well as this article can be found on NABE’s website (Vol. 44 No. 2). Or you can contact us if you are interested in viewing an author copy.
Ilhan K. Geckil and Patrick L. Anderson
This book demonstrates the use of various game theory techniques to address practical business, economic, legal, and public policy issues. It also illustrates the benefits of employing strategic thinking that incorporates the uncertainty surrounding the behavior of other parties.
The University Research Corridor (URC) is an alliance of Michigan’s three largest academic institutions: Michigan State University, the University of Michigan, and Wayne State University. The purpose of this alliance is to accelerate economic development in Michigan by educating students, attracting talented workers, supporting innovation, and facilitating the transfer of technology to the private sector.
In May of each year, the URC releases a report on a special topic that is important to Michigan’s economy. This summer (July 2009) marks the ten year anniversary of the founding of the Life Sciences Corridor, a collaboration among the URC universities and the Van Andel Institute, where the state committed to invest $1 billion in life sciences research and development (R&D) over a 20-year period. This report analyzes how this industry has changed since the founding of the Life Sciences Corridor, and how URC activities—research and development, education, and collaboration with private industry—support the growth of the life sciences industry.
The City of Adrian, located in southern Michigan, is home to a historic downtown, three centers of education, and the Lenawaee County seat. The City and its Downtown Development Authority identified two areas that were being underutilized, and retained Anderson Economic Group to develop a market strategy for both its Witt Property and the downtown riverfront.
We started the project by visiting the market, interviewing key stakeholders, and inventorying local retail supply to supplement our retail database. We combined this with our quantitative analyses, including demographic projections, a drive-time analysis and trade area delineation, a retail supply-demand analysis, a consumer expenditure analysis, and a residential unit absorption assessment. We then drafted a market strategy, with specific recommendations, for each of the two properties. Our strategy included residential, retail, and entertainment opportunities, specific project types and staging, and tenant recommendations for retail space.
We documented our analysis, findings, methods, and recommendations in a final report, which was delivered to the DDA and community leaders. The report included a detailed data appendix, visual examples and development options, and a concise executive summary to highlight our findings, and is available on the City of Adrian Economic Development web site, and from the link below.
Our experts have closely followed the ups and downs of the automotive industry, providing clients with detailed information to help them understand and plan for the resulting changes. Our industry analysis is designed to provide timely, concise, and relevant information that can help any organization—from professional investors, to retailers, to governments—understand the rapid change in the industry, and how restructuring in the industry may impact their own sales, revenues, customer base, and more.
In October, November, and December of 2008, our experts provided clients with a series of reports updating them on the economic relaities facing the automotive industry. AEG then teamed up with BBK, Ltd. in order to produce the first comprehensive analysis of the taxpayer costs of the Federal bridge financing requested by the auto manufacturers, compared with the likely costs of a bankruptcy declared by one or more of the same manufacturers.
Wolverine Power Cooperative, City of Rogers City, Rogers Township, and Presque Isle County Economic Development Commission retained Anderson Economic Group (AEG) to provide an independent study…
On December 11, 2008 the U.S. Department of Energy (DoE) announced that Michigan State University was awarded a $55 million grant to build a Facility for Rare Isotope Beams (FRIB). MSU’s most notable competition for the facility was the Argonne National Laboratory, located near Chicago, Illinois.
Patrick L. Anderson and Ilhan K. Geckil
A predictive model of voter behavior based on economic conditions.