Hedging and Coordinated Risk Management : Evidence from Thrift Conversion 1 First Draft : May 1995 Current Draft : December 1995
Hedging and Coordinated Risk Management : Evidence from Thrift Conversion 1 First Draft : May 1995 Current Draft : December 1995
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对冲和协调风险管理：来自储蓄机构转换的证据 1 第一稿：1995 年 5 月 当前草案：1995 年 12 月
DOI：
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发表时间：
1996
期刊：
影响因子：
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通讯作者：
Bernadette A. Minton
中科院分区：
文献类型：
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作者：
Catherine Schrand;Haluk Unal;Paul E. Fischer;M. Flannery;Bruce D. Grundy;D. Madan;Bernadette A. Minton
We provide an explanation for hedging as a means of allocating rather than reducing risk. We argue that firms facing a total risk constraint optimally allocate risk by reducing (increasing) exposure to risks providing zero (positive) economic rents. Our evidence suggests that mutual thrifts which convert to stock institutions reduce interestrate risk through improved balance sheet maturity matching and increased derivatives use at the time of conversion. This interest-rate risk reduction is followed by slower growth in credit risk. Post-conversion, risk management activities are significantly related to growth capacity and management compensation structure attained at conversion. Hedging and Coordinated Risk Management: Evidence from Thrift Conversions This paper proposes an approach for analyzing risk-management decisions when the payoffs to a firm’s portfolio are exposed to multiple sources of risk. In practice, firms reduce some risks while remaining exposed to, or even seeking, other sources of risk. For example, Merck & Co., Inc., states that reducing risk with respect to foreign exchange exposure stabilizes cash flows which allows the firm to increase risk by making investments in research and development (Lewent and Kearney, 1990). This paper provides an explanation for this observed coordination of risk management activities and evidence of this behavior in the savings and loan industry. We consider the situation in which multiple risks are bundled within particular assets or liabilities. The risk of a firm’s assets and liabilities are made up of many components such as input and output price risk, foreign exchange risk, interest-rate risk, credit risk, liquidity risk, market risk, and political risk. Firms are unable to acquire these risks separately in the spot markets. In such a case, firms that are constrained with respect to total risk coordinate their management of these multiple risks. The optimal allocation may include increasing one source of risk while decreasing another within the purchased bundle.l Specific predictions about optimal risk allocation require structure on the definition of “risk.” We segregate risk into two types based on a firm’s information advantage with respect to the source of risk. Firms earn rents or economic profits for bearing risk about which the firm has a comparative information advantage (compensated risk). By contrast, there are zero economic rents associated with homogeneous risks such as unexpected changes in foreign currency rates or commodity prices (hedgeable risk). If compensated and hedgeable risks are bundled, then the firm’s portfolio problem is constrained since changes in compensated risk must be associated with The term “allocation” is typically used in the existing literature to describe allocation of risk across parties with different risk preferences. (See Mason, 1995.) By contrast, we use the term “allocation” to represent the allocation of total risk between multiple sources such as interest-rate risk or credit risk.
