Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/258193 
Year of Publication: 
2021
Citation: 
[Journal:] Risks [ISSN:] 2227-9091 [Volume:] 9 [Issue:] 6 [Article No.:] 105 [Publisher:] MDPI [Place:] Basel [Year:] 2021 [Pages:] 1-36
Publisher: 
MDPI, Basel
Abstract: 
This conceptual paper focuses on the relationship between insolvency, capital structure, and value creation. The aim is twofold: to define risk-based capital measures able to absorb the effects of financial distress and avoid corporate default; and to verify conditions and limits of use of these measures in corporate financial policies. The capital measures based on insolvency risk will be defined by recalling the concepts of Cash Flow-at-Risk and Capital-at-Risk. A first check on the usefulness of these risk-based measures and their consistency with the principle of value maximization is carried out through a simulation model. The scenario analysis allows us to examine how financial and risk policies oriented by insolvency avoidance affect the firm value. According to evidence from the simulation model, these measures appear to be useful in lowering the default risk, but they require a continuous assessment of their impact on the firm value.
Subjects: 
insolvency risk
liquidity risk
default risk
risk capital
Capital-at-Risk
Cash Flow-at-Risk
firm value
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article
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