单词 | risk sharing |
释义 | risk sharing Contracts which shift risk from one party to another. Suppose a firm wishes to finance a risky project. If it uses its own money, it bears all the risk itself. If it issues equities capital to finance x per cent of the project, x per cent of the risk is borne by whoever buys the shares. If it sets up a new limited liability company, and buys its debenture which bear fixed interest, while other people buy the equity shares, all the risk is transferred to the new equity-holders, unless the project does so badly that the new company defaults on its debenture interest. Any desired proportion of risk can be shared by a suitable combination of equity capital and fixed-interest debt. |
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