Microeconomics Meets Valuation: On the Impossibility of Value Neutral Net Investments and Steady State in Terminal Value Models
- Frequent assumptions in terminal value models:
- “the firm shall earn its cost of capital”, “value neutral net investments” and
- “the firm is in a steady state with a constant growth rate”
- Reasonable standard assumption in microeconomics is decreasing returns to scale on investments
- Combining this assumption with a steady state requires constant (average) rate of returns and a particular type of technological progress
- If this particular progress is feasible then value neutral investments imply suboptimal investment scale and suboptimal corporate values
- As a result the combination of a steady state and value neutral net investments is not feasible under standard microeconomic assumptions about investment properties
This session will be held in English language.
Session E-3: Friday, 6 December 2024 I 11:00 – 12:00
Prof. Dr. Bernhard Schwetzler, CVA
HHL Leipzig Graduate School of Management I Chairholder and Professor of Finance and Banking
Academic Education:
- 1995 Habilitation in Business Administration, University of Regensburg, Germany
- 1992 Visiting Scholar, Krannert School of Management, Purdue University, West Lafayette, Indiana, USA
- 1989-1995 Senior Lecturer, Department of Investment, Finance & Banking, University of Regensburg, Germany
- 1989 Dr. rer. pol., University of Regensburg, Germany
- 1985-1989 Research Assistant, Department of Investment, Finance & Banking, University of Regensburg, Germany
- 1979-1985 Studies in Business Administration (Diplom-Kaufmann), University of Regensburg, Germany
Research Interests:
- International corporate transactions
- Corporate Valuation : DCF Valuation (Growth, Inflation, Taxes); Multiple-Based Valuation (Accuracy, Consistency)
- Private Equity: Performance Measurement, Bankruptcy Risk, Fund Raising, Add on Acquisitions
- Firm risk, capital structure and valuation of tax benefits
Memberships and Affiliations:
- Chairman of the expert groups "Fairness Opinion" and "Corporate Transaction and Valuation" of the Society of Investment Professionals in Germany (DVFA)
- Co-Founder and member of the board of the European Association of Certified Valuators and Analysts (EACVA e.V.)
- Member of the editorial board of CORPORATE FINANCE
- Member of the scientific advisory board of the German Private Equity and Venture Capital Association (BVK)
- Member of the investment committee of the Technologiegründerfonds Sachsen (TGFS)
- Member of the supervisory board of Onvista AG (2000-2006)
- Member of the German Finance Association, European Finance Association (EFA), German Academic Association for Business Research, Verein für Socialpolitik e.V.