Research on Valuation and Debt Risk

In an article in “BewertungsPraktiker”, Leonhard Knoll and Lina Manthey examine the consideration of debt risks in valuation models.  They discuss three approaches that are currently part of the professional discussion of this problem, namely the debt beta, the accounting for insolvency risk within the terminal value, and the consideration of the debt level.  The article further describes an empirical examination of the influence of the financial leverage using data obtained from the HDAX index (which comprises the DAX, MDAX, and TecDAX of the Deutsche Börse).  The analysis indicates that the methods used in practice to account for debt-related risks may not provide sufficiently reliable results.  It points to the need for further scientific examination of this issue.

The article by Knoll and Manthey was published in the November 2021 issue of “BewertungsPraktiker” on pages 106 through 115.