Next Article in Journal
Credit Risk Management of Property Investments through Multi-Criteria Indicators
Previous Article in Journal
Privacy Intrusiveness in Financial-Banking Fraud Detection
Article

Insolvency Risk and Value Maximization: A Convergence between Financial Management and Risk Management

Department of Economics and Management, “Guglielmo Marconi” University, 00193 Rome, Italy
Academic Editors: Roberto Moro Visconti, Salvador Cruz Rambaud and Joaquín López Pascual
Received: 20 April 2021 / Revised: 13 May 2021 / Accepted: 20 May 2021 / Published: 1 June 2021
(This article belongs to the Special Issue Microfinance Risk Management)
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. View Full-Text
Keywords: insolvency risk; liquidity risk; default risk; risk capital; Capital-at-Risk; Cash Flow-at-Risk; firm value insolvency risk; liquidity risk; default risk; risk capital; Capital-at-Risk; Cash Flow-at-Risk; firm value
Show Figures

Figure 1

MDPI and ACS Style

Gennaro, A. Insolvency Risk and Value Maximization: A Convergence between Financial Management and Risk Management. Risks 2021, 9, 105. https://0-doi-org.brum.beds.ac.uk/10.3390/risks9060105

AMA Style

Gennaro A. Insolvency Risk and Value Maximization: A Convergence between Financial Management and Risk Management. Risks. 2021; 9(6):105. https://0-doi-org.brum.beds.ac.uk/10.3390/risks9060105

Chicago/Turabian Style

Gennaro, Alessandro. 2021. "Insolvency Risk and Value Maximization: A Convergence between Financial Management and Risk Management" Risks 9, no. 6: 105. https://0-doi-org.brum.beds.ac.uk/10.3390/risks9060105

Find Other Styles
Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Article Access Map by Country/Region

1
Back to TopTop