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A Comprehensive Review of Scientific Literature on Methods for Determining Discount Rates in Corporate Practices

Author

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  • Klára Szűcs Markovics

    (University of Miskolc)

Abstract

On the basis of the findings of research conducted in eighteen countries and in the Central and Eastern European region, this study seeks to understand how the discount rate is set when capital budgeting practices are involved. According to the reviewed academic literature, the weighted average cost of capital is the most popular method of determining discount rates in a number of countries. Besides this, decision makers often apply the single method of corporate required rate of return regardless of the character of specific decision aspects and market risks.

Suggested Citation

  • Klára Szűcs Markovics, 2012. "A Comprehensive Review of Scientific Literature on Methods for Determining Discount Rates in Corporate Practices," Theory Methodology Practice (TMP), Faculty of Economics, University of Miskolc, vol. 8(02), pages 81-87.
    • Handle: RePEc:mic:tmpjrn:v:8:y:2012:i:02:p:81-87
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    File URL: http://tmp.gtk.uni-miskolc.hu/volumes/2012/02/TMP_2012_02_12_Szucs_Markovics.pdf
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    References listed on IDEAS

    as
    1. Graham, John R. & Harvey, Campbell R., 2001. "The theory and practice of corporate finance: evidence from the field," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 187-243, May.
    2. Brounen, D. & de Jong, A. & Koedijk, C.G., 2004. "Corporate Finance In Europe Confronting Theory With Practice," ERIM Report Series Research in Management ERS-2004-002-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
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    More about this item

    Keywords

    capital budgeting; discount rates; required rate of return; weighted average cost of capita;
    All these keywords.

    JEL classification:

    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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