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The Interest Rate Exposure of Nonfinancial Corporations

Posted: 21 Jun 2002  

Söhnke M. Bartram

Warwick Business School - Department of Finance

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Abstract

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

Bartram, Söhnke M., The Interest Rate Exposure of Nonfinancial Corporations. European Finance Review, Vol. 6, No. 1, pp. 101-125, 2002. Available at SSRN: https://ssrn.com/abstract=311880

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/

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