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Interest rate risk management with debt issues: Evidence from Europe

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  • Délèze, Frédéric
  • Korkeamäki, Timo

Abstract

In comparison to bank financing, public debt market may allow firms to more readily match maturity and risk structures between their assets and liabilities. We test whether new issuers on the European corporate bond markets experience a change in their interest rate sensitivity upon their bond issuance. We find that stock returns have become significantly less sensitive to interest rate fluctuations for firms that enter the publicly traded bond market. Our findings support the notion that firms manage their interest rate risk with new debt issues.

Suggested Citation

  • Délèze, Frédéric & Korkeamäki, Timo, 2018. "Interest rate risk management with debt issues: Evidence from Europe," Journal of Financial Stability, Elsevier, vol. 36(C), pages 1-11.
    • Handle: RePEc:eee:finsta:v:36:y:2018:i:c:p:1-11
    DOI: 10.1016/j.jfs.2018.01.003
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    More about this item

    Keywords

    Interest rate risk; Euro; Risk management;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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