The Impact of Inflation on Corporate Valuation Multiples : Empirical evidence from Sweden and the Eurozone

Sammanfattning

Background: Among valuation practitioners, equity valuation using multiples is a method of increased application. Their reliance on observable market information enables analysts to benchmark firms efficiently, even when forecasting accuracy is challenged by macroeconomic uncertainty. Consequently, understanding how commonly used multiples behave under inflationary pressure is essential for both investors and corporate executives seeking reliable tools for valuation. Purpose: The purpose of this study is to empirically investigate how inflation shapes corporate valuation multiples and to identify whether the relationship varies across firms operating under two different monetary regimes. Method: The study adopts a positivistic and deductive approach using a quantitative panel data design. Using two separate fixed effect regression models, the study examines how inflation affects corporate valuation multiples and whether the observed effect differs between an independent and a shared monetary regime. Conclusion: The empirical findings suggest that inflation cannot be considered a consistent determinant of lower valuation multiples across the sample period, but that the negative effect is more strongly associated with the discount rate effects of increased interest rates. Additionally, no statistical evidence was found of regime heterogeneity across the period, likely driven by the similarities to shock responses between regimes and global scope of sampled firms.