Corporate Risk Management as a Lever for Shareholder Value Creation

Posted: 15 Nov 2000

See all articles by Söhnke M. Bartram

Söhnke M. Bartram

Warwick Business School - Department of Finance; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Abstract

Firm value is influenced in many direct and indirect ways by financial risks which consist of unexpected changes in foreign exchange rates, interest rates and commodity prices. The fact that a significant number of corporations are committing resources to risk management activities is, however, only an indication for the potential of corporate risk management to increase firm value. This paper presents a comprehensive analysis of positive theories and their empirical 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, transaction 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.

Keywords: Risk management, agency cost, hedging, shareholder value, taxes, transaction cost, derivatives

JEL Classification: G3, F4, F3

Suggested Citation

Bartram, Söhnke M., Corporate Risk Management as a Lever for Shareholder Value Creation. Financial Markets, Institutions & Instruments, Vol. 9, No. 5, pp. 279-324, 2004; WBS Finance Group Research Paper No. 5. Available at SSRN: https://ssrn.com/abstract=250096

Söhnke M. Bartram (Contact Author)

Warwick Business School - Department of Finance ( email )

Coventry, CV4 7AL
United Kingdom
+44 (24) 7657 4168 (Phone)
+1 425 952 1070 (Fax)

HOME PAGE: http://go.warwick.ac.uk/sbartram/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
2,554
PlumX Metrics