Relationship between risk of debt financing and value of the coal company

Author

Lili, Xu

Author_Institution

Sch. of Econ. & Manage., Henan Polytech. Univ., Jiaozuo, China

fYear

2011

fDate

8-10 Aug. 2011

Firstpage

3201

Lastpage

3204

Abstract

Debt financing is universal in the term of operation of a firm. Risk of debt financing is certain combined with debt funds. The more debt financing is, higher the risk is. Variance between the real return and expected value is manifested by risk of debt financing, the more variance is, higher the risk is. The better method to solve risk is to realize the maximizing returns. In the hypothesis of efficient capital market, the maximizing returns are equivalence to the maximizing value of the company. Based on MM theory, analysis for relationship between debt financing and the corporate value has been made which the equation of corporate value on debt financing have been deduced. Further, in order to protecting benefits of debt-holders, amortization has been employed to deduce the new equation.

Keywords

coal; financial management; mining industry; MM theory; capital market; coal company value; debt financing; debt financing risk; Coal; Companies; Economic indicators; Equations; Finance; Supply and demand; MM theory; free cash flows; risk of debt financing; the maximizing value of the company;

fLanguage

English

Publisher

ieee

Conference_Titel

Artificial Intelligence, Management Science and Electronic Commerce (AIMSEC), 2011 2nd International Conference on

Conference_Location

Deng Leng

Print_ISBN

978-1-4577-0535-9

Type

conf

DOI

10.1109/AIMSEC.2011.6011094

Filename

6011094