Agency Costs of Corporate Risk Management

Financial Management, Volume 27, Number 1, Spring 1998

Posted: 20 Mar 1998

See all articles by Peter Tufano

Peter Tufano

University of Oxford - Said Business School; National Bureau of Economic Research (NBER); University of Oxford - Said Business School

Abstract

This paper discusses a potential cost to corporate risk management strategies that are based on cash-flow hedging. Cash-flow hedging strategies allow firms to avoid the deadweight costs of external financing by setting their internal cash flows equal their investment needs. In the presence of agency conflicts between managers and shareholders, these hedging strategies can be used to reduce shareholder wealth, insofar as they remove the valuable discipline that obtaining new external financing imposes on managers.

JEL Classification: G31, G32

Suggested Citation

Tufano, Peter, Agency Costs of Corporate Risk Management. Financial Management, Volume 27, Number 1, Spring 1998. Available at SSRN: https://ssrn.com/abstract=68971

Peter Tufano (Contact Author)

University of Oxford - Said Business School ( email )

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National Bureau of Economic Research (NBER)

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University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0) 1865 288551 (Phone)

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