Two essays in corporate risk management. Essay 1.~Derivatives use and the exchange rate risk of large United States corporations. Essay 2.~Asymmetric information, credit quality and the use of interest rate derivatives.

摘要

Over the past 20 years, the use of derivatives has fundamentally changed financial management, allowing firms to manage risk in innovative ways never before possible. While a number of theoretical papers have been written addressing motivations for corporate hedging, little empirical research exists on the topic. This dissertation contributes to the literature in this area by providing some of the first empirical evidence examining current theories on currency and interest rate risk management.;The first essay studies currency risk management by examining the cross-sectional determinants of the exchange rate risk of Fortune 500 companies. This study documents the importance of both currency derivatives use and operational hedges for managing exchange rate risk, both at the firm level and at the industry level. Operating hedges such as diversification, global operations and firm size are all associated with reduced exchange rate exposure. Currency derivatives use combined with these operational characteristics provides further reductions in exposure. These findings indicate that large firms are taking a firmwide, or strategic perspective in their currency risk management strategy, and are thus focusing on hedging overall economic exposure.;The second essay investigates the interest rate derivatives usage of Fortune 500 and S&P 500 nonfinancial firms over the period 1992 through 1994 to determine if evidence exists to support the asymmetric information theory as described by Titman (1992). This is the first study to directly investigate this theory and examine if firms which select synthetic fixed-rate financing (i.e., borrow short-term and use swaps to hedge interest rate risk, instead of selecting conventional fixed-rate financing) are more likely to undergo credit quality improvements when compared to other firms. Two different control groups are studied to eliminate possible size, credit quality and industry influences. Strong evidence is found in support of this theory in all tests. When restricting the sample to firms where asymmetric information costs are potentially the greatest, firms on the verge of an investment grade credit rating, the results are even stronger. Additional tests support these results and demonstrate the findings are robust. These findings are important because they document that swaps serve a highly valuable service for firms subject to information asymmetries.