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How do financial firms manage risk? / Kristine Watson Hankins in Management science, Vol. 57 N° 12 (Décembre 2011) 

Public ISBD [article]  in Management science > Vol. 57 N° 12 (Décembre 2011) . - pp. 2197-2212 Titre : How do financial firms manage risk? : Unraveling the interaction of financial and operational hedging Type de document : texte imprimé Auteurs : Kristine Watson Hankins, Auteur Année de publication : 2012 Article en page(s) : pp. 2197-2212 Note générale : Management Langues : Anglais (eng) Mots-clés : Finance  Corporater  finance  Financial  institutions  Banks  Risk  management Résumé : This paper investigates how firms manage risk by examining the relationship between financial and operational hedging using a sample of bank holding companies. Risk management theory holds that capital market imperfections make cash flow volatility costly. I investigate whether financial firms consider this cost or focus exclusively on managing tradable exposures. After documenting that acquisitions provide operational hedging by reducing potentially costly volatility, I find that postacquisition financial hedging declines even after controlling for the specific underlying risks. In addition, the decrease in financial hedging is related to the acquisition's level of operational hedging. Larger increases in operational hedging are followed by larger declines in financial hedging. These results indicate that firms in this sample manage aggregate risk, not just tradable exposures, and that operational hedging can substitute for financial hedging. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/57/12.toc [article] How do financial firms manage risk? : Unraveling the interaction of financial and operational hedging [texte imprimé] / Kristine Watson Hankins, Auteur . - 2012 . - pp. 2197-2212. Management Langues : Anglais (eng) in Management science > Vol. 57 N° 12 (Décembre 2011) . - pp. 2197-2212 Mots-clés : Finance  Corporater  finance  Financial  institutions  Banks  Risk  management Résumé : This paper investigates how firms manage risk by examining the relationship between financial and operational hedging using a sample of bank holding companies. Risk management theory holds that capital market imperfections make cash flow volatility costly. I investigate whether financial firms consider this cost or focus exclusively on managing tradable exposures. After documenting that acquisitions provide operational hedging by reducing potentially costly volatility, I find that postacquisition financial hedging declines even after controlling for the specific underlying risks. In addition, the decrease in financial hedging is related to the acquisition's level of operational hedging. Larger increases in operational hedging are followed by larger declines in financial hedging. These results indicate that firms in this sample manage aggregate risk, not just tradable exposures, and that operational hedging can substitute for financial hedging. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/57/12.toc