Board Composition And Corporate Use Of Interest Rate Derivatives
AbstractWe provide new evidence on the motives for corporate hedging by examining the relation between the quality of the firms' monitoring mechanisms and the quantity of interest rate derivatives employed. Because the capital structure decision and hedging decision are considered to be endogenous, the firm's capital structure and level of interest rate derivative use are modeled simultaneously. We show a positive relation between the relative influence of outside directors and the quantity of derivatives used. This evidence indicates that outside directors take an active role in derivatives usage and that firms employ hedging in the shareholders' best interests. 2004 The Southern Finance Association and the Southwestern Finance Association.
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Bibliographic InfoArticle provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.
Volume (Year): 27 (2004)
Issue (Month): 2 ()
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