The Size Effect Continues to be Relevant When Estimating the Cost of Capital (Part I of III)

In this paper, published in three parts with NACVA’s QuickRead, Roger Grabowski reviews the size effect, potential reasons why one observes the size effect, and correct common misconceptions and address criticisms of the Size Premia (SP). Throughout this paper, the author shows that using a pure market factor as the sole risk factor in estimating the expected return provide an incomplete estimate. For the last four decades, research has shown that adjustments to the CAPM are required. Here, Roger Grabowski addresses some of the criticism to the theoretical basis of the SP and to the application adopted through the CRSP Decile Size Premia and Risk Premium Report—Size Study. In part 2, Roger Grabowski demonstrates that the size premium critique by Clifford Ang is not warranted and that the alternative methodology proposed by that author is misleading and cannot be considered as an alternative to the Duff & Phelps’ SP. He also addresses other criticisms of the Duff & Phelps SP. Finally, in part 3 Roger Grabowski provides some practical guidance on efficiently and correctly applying SP.

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Big MAC II: Fresenius is the First (Regulatory) MAC in Delaware History (Part II of II)

This is a follow-up article about the first seller that successfully terminated a deal in Delaware due to a MAC clause. The previous article addressed the General MAC clause. This article addresses the Regulatory MAC clause.

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Transferring Closely Held Company Equity to a Key Employee—Part II of II
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