抄録
The validity of the Leland model, recently developed in the U.S., in the Japanese market is discussed by examining the insolvency risk premium in capital, shareholder capital and debt costs, with taxes neglected. The Leland model permits calculation of the company, shareholder and debt values with insolvency taken into account. Use of these values in calculation of the insolvency premium requires formulation of capital cost-company value, shareholder capital cost-shareholder value, and debt cost-debt value relationships. Assuming that the stochastic change of company value results from that of cash flow, the present study uses the cash discount model for these formulations, which are then used for calculation of the discount rate corresponding to company value, or the capital cost. Comparison of capital costs with and without insolvency gives the insolvency risk premium in capital cost. Similar calculations are made for shareholder capital and debt costs. Calculations based on current data on the Japanese financial market show that the insolvency risk premium increases rapidly when the debt ratio (i.e. the debt/company value ratio in the current values) exceeds 70%: when the debt ratio is 80%, the shareholder capital cost is about 20%, in which about 10% is the insolvency premium risk. These results are considered well representative of the present circumstances.
