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Valuation with mixed financing strategies

Author

Listed:
  • Stefan Dierkes

    (Georg-August-University-Göttingen)

  • Imke de Maeyer

    (Georg-August-University-Göttingen)

Abstract

In corporate valuation, it is common to assume either passive or active debt management. However, it is questionable whether these pure financing policies reflect the real financing policies of firms with a sufficient degree of accuracy. This shortcoming has led to the development of mixed financing strategies as combinations of pure financing strategies. Whereas hybrid financing is directly linked to the two-phase model, it is unclear how to apply discontinuous financing in such a setting. In this study, according to the two versions of hybrid financing, we analyze the implementation of discontinuous financing in a two-phase model. Thereby, we present a simpler and more intuitive derivation of the valuation equation for discontinuous financing to increase its acceptance and its use for corporate valuation practice. Moreover, we compare the different mixed financing strategies with each other theoretically, and we conduct simulations to elucidate the impact on market values and the sensitivities of input parameters. The study concludes that the presented mixed financing strategies can help in the attempt to reflect the real financing behavior of firms more accurately and, therefore, constitute a valuable alternative to pure financing strategies for valuation.

Suggested Citation

  • Stefan Dierkes & Imke de Maeyer, 2020. "Valuation with mixed financing strategies," Business Research, Springer;German Academic Association for Business Research, vol. 13(3), pages 1317-1341, November.
    • Handle: RePEc:spr:busres:v:13:y:2020:i:3:d:10.1007_s40685-020-00126-w
    DOI: 10.1007/s40685-020-00126-w
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    Cited by:

    1. Stefan Dierkes & Imke Maeyer, 2022. "Terminal value calculation with discontinuous financing and debt categories," Journal of Business Economics, Springer, vol. 92(7), pages 1207-1248, September.
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    4. Zbigniew Kurylek & Dariusz Porebski, 2022. "Mezzanine Capital Analysis and Financing Results for Companies," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 267-282.

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    More about this item

    Keywords

    Valuation; Financing strategy; Mixed financing strategy; Hybrid financing; Discontinuous financing; Two-phase model;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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