Capital Structure, Precautionary Balances, and Valuation of the Firm: The Problem of Financial Risk
1970; Cambridge University Press; Volume: 5; Issue: 1 Linguagem: Inglês
10.2307/2979006
ISSN1756-6916
Autores Tópico(s)Corporate Finance and Governance
ResumoA useful distinction is sometimes maintained between business risk associated with uncertainty of receipts generated by a firm's assets and financial risk defined as the probability of incurring penalty costs stemming from liability claims on assets and asset yields. In fact, disagreement in recent literature on the exact role of capital structure in market valuation of business firms is easily interpreted once the risk assumptions of the literature such as perfect certainty, business risk, and financial risk have been identified.
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