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| Author: | Landes, T. Loistl, O. |
| Title: | Capital structure, principal/agency-relation and the value of the corporation: a simulation study |
| Journal: | Omega
1991 : APR, VOL. 19:4, p. 291-303 |
| Index terms: | CAPITAL STRUCTURE OF COMPANIES SIMULATION ASSET VALUATION EARNINGS LIQUID ASSETS |
| Language: | eng |
| Abstract: | It is assumed that a corporation yields an uncertain stream of future earnings to meet the contractual payments to creditors and dividends to shareholders. Fluctuating earnings and fixed obligations embody a risk of non-liquidity which might lead to bankruptcy. According to the principal/agency-approach, different capital structures might therefore lead to different streams of earnings. Relying on the present-value concept, these conclusions imply that the value of the corporation and especially that of equity is influenced by its capital structure. The implications of the model are checked against the situation of three major German companies. |
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