Financial distress and corporate risk management: Theory and evidence

• 成果类型: Article
• 署名作者: Purnanandam, Amiyatosh
• 署名单位: University of Michigan System; University of Michigan
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2007.04.003
• 发表日期: 2008
• 页码: 706-739
• 关键词: hedging; Risk-shifting; asset substitution; derivatives

摘要

This paper extends the current theoretical models of corporate risk-management in the presence of financial distress costs and tests the model's predictions using a comprehensive data set. I show that the shareholders optimally engage in ex-post (i.e., after the debt issuance) risk-management activities even without a pre-commitment to do so. The model predicts a positive (negative) relation between leverage and hedging for moderately (highly) leveraged firms. Consistent with the theory, empirically I find a non-monotonic relation between leverage and hedging. Further, the effect of leverage on hedging is higher for firms in highly concentrated industries. (C) 2008 Elsevier B.V. All rights reserved.