BUSINESS VALUATION OF SMALL AND MEDIUM ENTERPRISES IN EMERGING MARKETS: CHALLENGES AND AN ADAPTED INCOME-BASED APPROACH — EVIDENCE FROM UZBEKISTAN

Abstract

Accurate business valuation is critical for investment decisions, financing, mergers, and regulatory compliance—especially for Small and Medium Enterprises (SMEs) in emerging economies. In Uzbekistan, despite rapid SME growth and state-driven financial inclusion initiatives, valuation practices remain hindered by data scarcity, low financial transparency, and limited comparables. This study examines the applicability and limitations of traditional valuation approaches (income, market, and asset-based) for Uzbek SMEs and proposes a modified income-based model incorporating country- and industry-specific risk premiums. Using primary data from 25 SMEs in Samarkand (2024–2025), alongside expert interviews with 8 certified appraisers and financial analysts, the research employs discounted cash flow (DCF) simulations with adjusted discount rates. Results indicate that standard DCF models overestimate enterprise value by 18–32% when failing to account for local risk factors. The proposed adaptation—integrating a sovereign risk premium, SME-size premium, and sector volatility coefficient—significantly improves valuation reliability (reducing error margin to ±9%). The study contributes a practical, context-sensitive framework for SME valuation in Central Asian emerging markets and supports harmonization of national valuation standards with IVS (International Valuation Standards).