This paper elaborates on a new default-based cost of capital estimation for pri- vate-held firms. We test the model’s ability to incorporate systematic risk and size premium. Results highlight a positive and statistically significant effect of CAPM expected return and size premiums on this novel cost of capital meas- ure. Beyond the utility in practice for private equity valuation, preliminary re- sults are promising for application on a larger cross-country sample.
Cost of Capital for Private Firms
Beltrame, Federico
;Grassetti, Luca;
2023-01-01
Abstract
This paper elaborates on a new default-based cost of capital estimation for pri- vate-held firms. We test the model’s ability to incorporate systematic risk and size premium. Results highlight a positive and statistically significant effect of CAPM expected return and size premiums on this novel cost of capital meas- ure. Beyond the utility in practice for private equity valuation, preliminary re- sults are promising for application on a larger cross-country sample.File in questo prodotto:
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