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Some Remarks On the Impact of Risk Management on Firm Value
[O vlivu risk managementu na hodnotu firmy]

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  • Jiří Hnilica

Abstract

The paper focuses on how risk management may influence the value of a company. Situation is discussed with models of Modigliani - Miller - Fama and their assumptions in the background. After the basic explications of the afore mentioned models and of the decision-making rule for investments, particular states where risk management may add value are analyzed. An attention is paid mainly to costs of taxation and financial distress, underinvestment and asset substitution.

Suggested Citation

  • Jiří Hnilica, 2005. "Some Remarks On the Impact of Risk Management on Firm Value [O vlivu risk managementu na hodnotu firmy]," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2005(4), pages 80-112.
    • Handle: RePEc:prg:jnlaop:v:2005:y:2005:i:4:id:208:p:80-112
    DOI: 10.18267/j.aop.208
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    References listed on IDEAS

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    1. Graham, J.R. & Smith, Jr.C.W., 1996. "The Incentives to Hedge," Papers 96-03, Rochester, Business - Financial Research and Policy Studies.
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    3. René M. Stulz, 1996. "Rethinking Risk Management," Journal of Applied Corporate Finance, Morgan Stanley, vol. 9(3), pages 8-25, September.
    4. Stiglitz, Joseph E, 1974. "On the Irrelevance of Corporate Financial Policy," American Economic Review, American Economic Association, vol. 64(6), pages 851-866, December.
    5. Tufano, Peter, 1996. "Who Manages Risk? An Empirical Examination of Risk Management Practices in the Gold Mining Industry," Journal of Finance, American Finance Association, vol. 51(4), pages 1097-1137, September.
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    7. Froot, Kenneth A & Scharfstein, David S & Stein, Jeremy C, 1993. "Risk Management: Coordinating Corporate Investment and Financing Policies," Journal of Finance, American Finance Association, vol. 48(5), pages 1629-1658, December.
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    More about this item

    Keywords

    risk management; hedging; firm value;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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