The Interest Rate Exposure of Nonfinancial Corporations
31 Pages Posted: 18 Dec 2001
Date Written: September 6, 2001
Many interest rates are as volatile as exchange rates and thus represent an equally important source of risk for corporations. While this is true not only for financial institutions, but for other corporations as well, little is known about the interest rate exposure of nonfinancial firms. Consequently, this paper investigates the impact of interest rate risk on a large sample of nonfinancial corporations. It presents empirical evidence for the existence of linear and nonlinear exposures with regard to movements in various interest rate variables. The interest rate exposure is empirically determined by measures of firm liquidity, but not by financial leverage.
Keywords: Interest rates, exposure, derivatives, risk management, corporate finance, capital markets
JEL Classification: G3, F4, F3
Suggested Citation: Suggested Citation