Arbeitspapier
Cost of capital adjusted for governance risk through a multiplicative model of expected returns
This paper sets forth another contribution to the long standing debate over cost of capital, firstly by introducing a multiplicative model that translates the inner structure of the weighted average cost of capital rate and, secondly, adjusting such rate for governance risk. The conventional wisdom states that the cost of capital may be figured out by means of a weighted average of debt and capital. But this is a linear approximation only, which may bring about miscalculations, whereas the multiplicative model not only takes account of that linear approximation but also the joint outcome of expected costs of debt and stock, and their proportions in the capital structure. And finally, we factor into the cost of capital expression a rate of governance risk.
- Language
-
Englisch
- Bibliographic citation
-
Series: Serie Documentos de Trabajo ; No. 383
- Classification
-
Wirtschaft
Corporate Finance and Governance: General
Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
- Subject
-
cost of capital
governance risk
weighted average cost of capital
governance index
multiplicative model of returns
Kapitalkosten
- Event
-
Geistige Schöpfung
- (who)
-
Apreda, Rodolfo
- Event
-
Veröffentlichung
- (who)
-
Universidad del Centro de Estudios Macroeconómicos de Argentina (UCEMA)
- (where)
-
Buenos Aires
- (when)
-
2008
- Handle
- Last update
-
10.03.2025, 11:41 AM CET
Data provider
This object is provided by:
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Apreda, Rodolfo
- Universidad del Centro de Estudios Macroeconómicos de Argentina (UCEMA)
Time of origin
- 2008
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