Board Composition and Corporate Use of Interest Rate Derivatives

Posted: 18 Jul 2003

See all articles by Kenneth A. Borokhovich

Kenneth A. Borokhovich

Miami University

Kelly R. Brunarski

Miami University of Ohio - Department of Finance

Claire E. Crutchley

Auburn University

Betty J. Simkins

Oklahoma State University - Stillwater - Department of Finance

Abstract

We provide new evidence on the motives for corporate hedging by examining the relation between the quality of the firms' monitoring mechanisms and the quantity of interest rate derivatives employed. Because the capital structure decision and hedging decision are considered to be endogenous, the firm's capital structure and level of interest rate derivative use are modeled simultaneously. We show a positive relation between the relative influence of outside directors and the quantity of derivatives used. This evidence is consistent with outside directors taking an active role in derivatives usage and with firms employing hedging in the shareholders' best interests.

JEL Classification: G3, G32, G39

Suggested Citation

Borokhovich, Kenneth A. and Brunarski, Kelly R. and Crutchley, Claire E. and Simkins, Betty J., Board Composition and Corporate Use of Interest Rate Derivatives. Journal of Financial Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=402380

Kenneth A. Borokhovich (Contact Author)

Miami University ( email )

Oxford, OH 45056
United States
513-529-1502 (Phone)
513-529-8598 (Fax)

Kelly R. Brunarski

Miami University of Ohio - Department of Finance ( email )

Farmer School of Business
Oxford, OH 45056
United States
513-677-2750 (Phone)

Claire E. Crutchley

Auburn University ( email )

415 West Magnolia Avenue
303 Lowder Business Building
Auburn, AL 36849
United States
334-844-3002 (Phone)
334-844-4960 (Fax)

Betty J. Simkins

Oklahoma State University - Stillwater - Department of Finance ( email )

336 Business Building
Stillwater, OK 74078-4011
United States
405-744-8625 (Phone)
405-744-5180 (Fax)

HOME PAGE: http://spears.okstate.edu/~simkins

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