A Guide to Corporate Risk Management

35 Pages Posted: 13 Aug 2014

See all articles by Gordon M. Bodnar

Gordon M. Bodnar

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS)

Erasmo Giambona

Syracuse University - Whitman School of Management - Finance Department; James D. Kuhn Center for Real Estate

John R. Graham

Duke University; National Bureau of Economic Research (NBER)

Campbell R. Harvey

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

Date Written: August 12, 2014

Abstract

A number of theories have been proposed to explain why firms hedge. Unfortunately, these theories are hard to test: While we might observe the hedges, it is hard to answer the question of “why” hedging occurs. Our paper addresses the “why” by directly questioning the managers that make the risk management decisions. Our results present a fresh, inside view of corporate risk management. Rather than hedging being conducted solely by “firms”, our results suggest that personal risk aversion in combination with other executive traits plays a key role in whether a company hedges. As such, our results suggest an important deficiency in many modern theories of risk management which ignore the role of the individual manager. These presentation slides are based on our paper "A View Inside Corporate Risk Management". The research paper is available at http://ssrn.com/abstract=2438884.

Keywords: Risk Management, Hedging, Managerial Risk Aversion, Behavioral Finance, Manager fixed-effects, Interest rate risk, Credit risk, Commodity risk, Foreign exchange risk.

JEL Classification: G02, G30, G32

Suggested Citation

Bodnar, Gordon M. and Giambona, Erasmo and Graham, John Robert and Harvey, Campbell R., A Guide to Corporate Risk Management (August 12, 2014). Available at SSRN: https://ssrn.com/abstract=2479483 or http://dx.doi.org/10.2139/ssrn.2479483

Gordon M. Bodnar

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS) ( email )

1740 Massachusetts Avenue, NW
Washington, DC 20036
United States
202-663-7731 (Phone)
202-663-7718 (Fax)

Erasmo Giambona

Syracuse University - Whitman School of Management - Finance Department; James D. Kuhn Center for Real Estate ( email )

721 University Avenue
RM 120-D
Syracuse, NY 13244-2450
United States
315 443-4885 (Phone)

John Robert Graham

Duke University ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7857 (Phone)
919-660-8030 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Campbell R. Harvey (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7768 (Phone)
919-660-8030 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
874
rank
25,702
Abstract Views
3,533
PlumX Metrics