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| Tekijä: | Purnanandam, A. |
| Otsikko: | Financial distress and corporate risk management: Theory and evidence |
| Lehti: | Journal of Financial Economics
2008 : MAR, VOL. 87:3, p. 706-739 |
| Asiasana: | finance risk management assets hedging derivative securities industries companies models USA |
| Kieli: | eng |
| Tiivistelmä: | In this paper, extended are the current theoretical models of corporate risk-management in the presence of financial distress costs. Using a comprehensive data set, model's predictions are tested. It is shown that the shareholders optimally engage in ex-post risk-management activities even without a pre-commitment. The model predicts a positive (negative) relation btw. leverage and hedging (here as: l-and-h.) for moderately (highly) leveraged firms. Consistent with the theory, there is empirically found a non-monotonic relation btw. l-and-h. Furthermore, for companies in highly concentrated industries, the effect of leverage on hedging is higher. |
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