Download Advances in Financial Risk Management: Corporates, by Jonathan A. Batten, Peter MacKay, P. Mackay, N. Wagner PDF

By Jonathan A. Batten, Peter MacKay, P. Mackay, N. Wagner

The newest examine on measuring, coping with and pricing monetary danger. 3 huge views are thought of: monetary danger in non-financial organizations; in monetary intermediaries equivalent to banks; and at last in the context of a portfolio of securities of other credits caliber and marketability.

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954)*** Notes: This table reports firm-level probit regressions of derivatives usage on measures of the degree of competition and additional control variables. The dependent variable takes a value of 1 if the firm reports using derivatives in 1999 and 0 otherwise. All variable definitions can be found in the Appendix. Figures in parentheses denote heteroskedasticity-robust standard errors. Statistical significance is indicated by ***, **, and * for the 1%, 5% and 10% levels respectively. 4 Competition and the probability of derivatives usage Strategic Risk Management 17 In unreported analysis we examine the impact of competition on a firm’s extent of derivatives usage, because Mello and Ruckes (2008) predict that firms hedge less if competition is more intense.

First they show that the nature of competition can affect corporate derivatives strategies, and thus support theoretical predictions by Adam, Dasgupta and Titman (2007) and Mello and Ruckes (2008). Second, the results highlight that derivatives strategies Strategic Risk Management 5 are likely to be interdependent, which implies a need for equilibrium models to better understand corporate risk management behaviors. Our results also contribute to several other strands of the literature. Most of the empirical literature on corporate risk management has examined how firm-specific factors, such as firm size, tax considerations, financial constraints, growth options, and managerial incentives affect firms’ hedging strategies.

The dummy variable Di takes a value of one if a firm disclosed the use of FX derivatives in 1999 and zero otherwise; Fj measures the fraction of derivatives users in firm i’s industry, calculated as the market value of firms in the industry that use FX derivatives divided by the market value of all firms in the industry. When calculating F, we exclude the firm’s own hedging decision. All other variable definitions can be found in the Appendix. The second and third columns provide sub-sample analyses for more/less competitive industries (Herfindahl index and price-cost margin below/above median values).

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