Research ArticleOpen AccessGoogle Scholar indexed
Cost of Capital for Private Firms
Department of Economics and Statistics, University of Udine, Udine, Italy
Department of Economics and Statistics, University of Udine, Udine, Italy
Department of Management, Ca’ Foscari University, Venice, Italy
- 1 Department of Economics and Statistics, University of Udine, Udine, Italy
- 2 Department of Economics and Statistics, University of Udine, Udine, Italy
- 3 Department of Management, Ca’ Foscari University, Venice, Italy
Theoretical Economics Letters·Volume 13 (2023)·Pages 535–548·Published 18 May 2023·DOI10.4236/tel.2023.133034
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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 ef fect of CAPM expected return and size premiums on this novel cost of cap ital measure. Beyond the utility in practice for private equity valuation, pre liminary results are promising for application on a larger cross-country sample.
KeywordsSize PremiumCost of CapitalDefault RiskPrivate Firms
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