For several years, when setting discount rates Aswath
Damodaran, Ph.D., has advocated more consideration of
country risk premiums (CRP) when it comes to the
valuation of companies with activities in emerging
markets. We have to acknowledge that his approach is
enjoying growing support among investment banks and
auditing firms. At the same time, it is to be noted that
Damodaran’s concept has failed to resonate sufficiently
with the academic community. This is reason enough to
perform a systematic analysis and critical discussion of
his CRP concept. Damodaran’s initial considerations
concerning a CRP can be found in Damodaran (1999a,
2003), with further essentially unchanged mentions in
his more recent publications. In our contribution we
will concentrate on the two aforementioned sources. pdf
2012