Valuation of shares and other equity in the financial accounts of the Spanish economy

Abstract

The document develops in detail the references in the Methodological Notes to the Financial Accounts of the Spanish Economy (FASE) to shares and other equity. In addition to referring to the determining of the market value of quoted and unquoted shares, of shares issued by mutual funds and of other equity, the document focuses particularly on the valuation of Spanish non-financial corporations’ unquoted shares. The market value of these unquoted shares is estimated by discounting the profits obtained, using as a discount factor a rate inferred from the implicit discount rate obtained for quoted corporations and from other adjustments. The significance of this method as opposed to that recommended by ESA 95 (based, in short, on applying the capitalisation/own funds ratio of quoted corporations to the own funds of unquoted corporations), is that it is better adapted to the Spanish securities market, where a small number of securities account for a very sizable percentage of stock market capitalisation. Further, the method followed by the Banco de España is underpinned both by SNA and ESA 95, as the two Manuals show that the valuation at current prices of an asset can be approximated by calculating the present or discounted value of the flow of future returns generated by that asset. Finally, the document explains the use of the databases of the Banco de España Central Balance Sheet Data Office to approximate the market value of non-financial corporations’ shares