Firm valuation approach with Data Envelopment Analysis - Borsa İstanbul example

Increasing number of public offerings, transactions in secondary markets, privatization practices as a result of liberal economic policies and increasing mergers/takeover practices make firm valuation more and more important. Due to its increasing importance, there has been an increase in firm valuation methods. Firm valuation method using data envelopment analysis (DEA) which is discussed in this study, is also a tool that can be used to find out what the true value of a firm should be. In the literature, it is seen that there are very limited studies on the use of DEA in firm valuation, which is understood to be widely used in efficiency comparisons. The main motive in conducting this study is to expand this limited field of study with new empirical examples and is to test whether the value ranges and maximum values found by using data envelopment analysis cover the known market values of firms which are operating in "different sectors" and thereby contributing to the development of valuation methods that can be used by experts dealing with company valuation activities. This test has never been done in Turkey before and therefore its validity has not been tested, In this context, in this study, after giving the information about valuation, DEA and valuation with DEA, in the application phase of the study, the estimated values of the companies operating in the banking, food-beverage, cement and real estate investment partnership sectors and whose shares are traded in Borsa Istanbul as a result of DEA are compared with the market values of those firms and very satisfactory results were obtained. This method, which is understood to be able to find more sensitive firm value ranges as a result of increasing the number of companies to be included in the analysis and thus increasing the probability of finding peer companies, is considered to be very useful for testing the results obtained from other valuation methods.