CHAPTER 4Significant Determinants of Risk Management of Non-Financial Firms

This chapter presents empirical studies of risk management within a specific industry. We show that the use of adequate data to measure the benefits generated by risk management may be crucial.1

The industry examined is that of gold producers in North America, and the risk variable is the final sale price of the product, namely one ounce of gold. We analyze only one risk because high-quality data on the other business risks and on their correlations were not available.

First, we limit our analysis to a single financial decision variable for the company: the optimal risk hedging. The empirical tests published in the literature provide contradictory results regarding the effect of risk hedging on firm value and shareholder welfare. Studies that did not address the simultaneous effects of risk hedging and other financial decisions at the company may have drawn incorrect conclusions about the effects of risk management.

The article by Dionne and Triki (2013) proposes a theoretical model of risk management that analyses the simultaneous choices of risk hedging and firm debt. The empirical results show that simultaneous analysis of decisions affects the analysis of determinants of risk management in the gold mining industry. They also shed light on the effects of corporate governance on risk management.


For more than 30 years, the finance literature has discussed the theoretical ...

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