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  5. Evaluating Business Losses in a Forensic Setting & Forensic Expert Survey Results
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Evaluating Business Losses in a Forensic Setting & Forensic Expert Survey Results

Paper Session

Sunday, Jan. 9, 2022 12:15 PM - 2:15 PM (EST)

Hosted By: National Association of Forensic Economics
  • Chair: Donal Kirwan, Forensic Human Resources

A 2021 Survey of Forensic Experts: Their Methods, Estimates, and Perspectives

David Schap
,
College of the Holy Cross
Roman Garagulagian
,
Forensic Economic Services, LLC
David I. Rosenbaum
,
University of Nebraska-Lincoln

Abstract

Members of three organizations (American Academy of Economic and Financial Experts, Collegium of Pecuniary Damages Experts, and National Association of Forensic Economics) were invited to complete an electronic survey administered in early 2021. Survey questions explored methods of forensic analysis as well as aspects related to each respondent's academic training, professional experience, and level of professional engagement. Respondents were also invited to comment on ethical concerns that they may have observed in their professional work. The survey results include statistical summaries of responses as well as individual comments made by respondents, but without attribution so as to preserve anonymity.

Compensation for Loss of the Benefit of the Bargain in Professional Negligence

Craig A. Allen
,
Craig A. Allen, FCAS

Abstract

"Benefit of the bargain" damages compensate not only for costs but also for economic profits lost when a contract is breached. Negligence by a professional like a lawyer, realtor or technology professional can interfere with the performance of a contract, leading to the loss of such profits. This session will enumerate the principles governing where the law provides compensation for such a loss of profits.

Diversification Discounts and The Valuation Of Businesses: An Industry-Level Approach

Nikanor Volkov
,
Mercer University
Steven Shapiro
,
New York Institute of Technology and Analytic Resources, LLC

Abstract

We present estimates of the effects of diversification on historic rates of return on equities over the period from 1977 to 2018. Our empirical results are computed and reported on a primary industry level as reported by the company (using the two-digit SIC Code). We find that, on average, the excess returns of diversified firms in most industries (56 out of 66 2-digit SIC code defined industries, or about 85% of all industries in the sample) are not affected by their diversification status. However, diversified firms in the remaining industries exhibit significant excess returns that are attributable to their diversification status. The magnitude of the excess returns is rather significant while the direction of the excess return also varies by primary industry. Additionally, the study reveals interesting results pertaining to the effect of size on excess returns on an industry level. The conventional finding postulated in Fama and French (1993) suggests that small firms exhibit consistently higher excess returns when compared to larger firms. In the industry-level tests performed in this study, we control for the Fama French factors and find that, while the size effects appear to generally be consistent with the conventional findings on the effects of size on the excess returns (smaller firms produce consistently higher returns), there exist some significant departures from this view. A number of industries exhibit no or a negative relation between excess returns and size. Such findings suggest that a closer evaluation of the size effects on an industry level should be considered.

Discussant(s)
Christopher Young
,
Rutgers University
Michael O'Hara
,
University of Omaha
JEL Classifications
  • K0 - General