Essays on corporate risk management and governance.

摘要

This dissertation is a collection of two essays on the relationship between the strength of corporate governance and risk management in an international context. Essay 1 examines the impact of the strength of corporate governance on corporate hedging activities. Essay 2 considers the reflection of this relationship between corporate governance and hedging on firms' valuation.; In Essay 1, I examine the relationship between corporate governance and hedging activities. I first test whether corporate governance influences the degree of firms' hedging activities using the use of foreign currency derivatives as a proxy for hedging activities. Then, I examine the impact of corporate governance on why firms use such derivatives. Corporate governance can provide mechanisms to effectively monitor the corporate use of derivatives. Using a sample of firms from 33 countries over the period 1990 to 1999, I find a positive relationship between the strength of corporate governance and currency hedging activities. More interestingly, I find that firms with strong governance use currency derivatives for value-maximizing reasons as established by the theory. On the other hand, firms with weak governance use such derivatives for managerial self-interests and speculation. These results are robust to various alternative tests including the consideration of the possible endogeneity between the hedging policy, corporate governance, and other financial policies. Overall, the results provide the first comprehensive evidence of the important role of corporate governance on corporate hedging activities.; In Essay 2, I examine the impact of governance on the relationship between hedging and firm performance. Results indicate that hedging is value-increasing worldwide. At the cross-section, the positive impact of hedging on firm value depends on the strength of corporate governance. The hedging premium is statistically significant and economically large for firms with strong internal corporate governance (such as those with an institutional blockholder) and those which reside in countries with strong external governance (such as those with an English legal origin), and insignificant for firms with weak internal governance and those which reside in countries with weak external governance.