Peter Reichling is Professor of Finance and Head of the Department of Banking and Finance at Otto von Guericke University Magdeburg, Germany. He holds a number of posts at the university: member of the senate of Otto von Guericke University, vice dean of international affairs, vice chair of the examination board, head of the PhD commission of the Faculty of Economics and Management, and study director of the master’s program in Financial Economics. Between 1998 and 2001, Peter Reichling conducted his academic carrier in several domestic and foreign universities, including University of Innsbruck, Austria, University of Ulm, Germany, Johannes Gutenberg University Mainz, Germany, Free University of Bolzano, Italy. Since 2000, he also lectures in executive MBA programs at Academy of National Economy, Moscow, Russia, Business School Magdeburg, Goethe Business School, Frankfurt am Main, Mannheim Business School, and Johannes Gutenberg University Mainz in Germany. He gave lectures as a visiting professor at Shanxi University of Finance and Economics, Taiyuan, China, in 2006 and was guest lecturer at the National Bureau of Statistics of China, Beijing, in 2009 and the Warsaw School of Economics, Poland, in 1998 and 1999. Since 2017, he is also a guest lecturer at the Vietnamese-German University, Ho Chi Minh City, Vietnam, and Financial University, Moscow, Russia. Peter Reichling’s research interests include risk management, performance measurement and downside risk. Specifically, he researches on credit risk, company valuation, risk controlling, performance of mutual funds, and downside risk-oriented portfolio management.
In cost-of-capital computations, credit risk is only taken into consideration at the level of the debt beta approach. We show that applications of the debt beta approach in company valuation suffer from unrealistic assumptions about the market index and…