Corporate Risk Management as a Lever for Shareholder Value Creation
AbstractFirm value is influenced in many direct and indirect ways by financial risks, which consist of unexpected changes of foreign exchange rates, interest rates and commodity prices. The fact that a significant number of corporations are committing resources to risk management activi-ties is, however, only an indication of the potential of corporate risk management to increase firm value. This paper presents a comprehensive review of positive theories and their empiri-cal evidence regarding the contribution of corporate risk management to shareholder value. It is argued that because of realistic capital market imperfections, such as agency costs, transac-tion costs, taxes, and increasing costs of external financing, risk management at the firm level (as opposed to risk management by stock owners) represents a means to increase firm value to the benefit of the shareholders.
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Bibliographic InfoPaper provided by EconWPA in its series Finance with number 0108002.
Length: 84 pages
Date of creation: 10 Aug 2001
Date of revision: 10 Aug 2001
Note: Type of Document - Acrobat PDF; prepared on IBM PC; pages: 84 ; figures: included. Financial Markets, Institutions and Instruments, Vol. 9, Iss. 5, December 2000, 279-324
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risk management; agency cost; hedging; shareholder value; taxes; transaction cost; derivatives;
Other versions of this item:
- Bartram, S.M., 2000. "Corporate Risk Management as a Lever for Shareholder Value Creation," Papers 00-58, Southern California - School of Business Administration.
- G3 - Financial Economics - - Corporate Finance and Governance
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
- F3 - International Economics - - International Finance
This paper has been announced in the following NEP Reports:
- NEP-ACC-2001-08-15 (Accounting & Auditing)
- NEP-ALL-2001-08-15 (All new papers)
- NEP-FIN-2001-08-15 (Finance)
- NEP-IFN-2001-08-15 (International Finance)
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