This paper elaborates on a new default-based cost of capital estimation for private-held firms. We test the model’s ability to incorporate systematic risk and size premium. Results highlight positive statistically significant effect CAPM expected return premiums this novel measure. Beyond utility in practice private equity valuation, preliminary results are promising application larger cross-co...

The Wharton Financial Institutions Center provides a multidisciplinary research approach to the problems and opportunities facing the financial services industry in its search for competitive excellence. The Center's research focuses on the issues related to managing risk at the firm level as well as ways to improve productivity and performance. The Center fosters the development of a community...

This study provides new estimates of systematic risk and the cost of equity capital for the pharmaceutical, biotechnology, and medical device sectors using data for firms with publicly-traded stock on U.S. exchanges during 2001-2005 and 2006-2008. Two frameworks are employed for estimating firms’ risk and the cost of equity capital: (1) the capital asset pricing model, and (2) the Fama-French t...