Title :
The confusion between Cost of capital and cost of financing and its harm
Author :
Song, Lin ; Wu, Jing
Author_Institution :
Coll. of Finance, Shandong Univ. of Finance, SUF, Jinan, China
fDate :
June 29 2010-July 1 2010
Abstract :
Different from cost of financing, Cost of capital reflects the right Corporate Governance mechanism and the respect to the reward of risk of capital. But cost of capital is always confused with cost of financing in theory in China. If we take cost of financing as the discount rate in investment decision-making, it will lead to excessive investment and waste of capital, if we take it into the financing decision-making, it will cause the financing order quite different from that of western company , also it will cut off the relation between financing theory and investment theory.
Keywords :
costing; decision making; investment; capital cost; corporate governance mechanism; financing cost; financing decision making; investment decision making; risk reward; Artificial neural networks; Companies; Decision making; Impedance; corporate governance; cost of capital; cost of financing; risk pricing;
Conference_Titel :
Communication Systems, Networks and Applications (ICCSNA), 2010 Second International Conference on
Conference_Location :
Hong Kong
Print_ISBN :
978-1-4244-7475-2
DOI :
10.1109/ICCSNA.2010.5588925
