Handbook of Empirical Corporate Finance

Chapter 18 MANAGING CORPORATE RISK 

CLIFFORD W. SMITH, JR.

William E. Simon Graduate School of Business Administration, University of Rochester

Contents

Abstract

Keywords

1. Introduction

2. Risk exposures and hedging

2.1. Risk management instruments

2.2. Risk exposure

3. Benefits of risk management

3.1. Ownership structure

3.2. Risk shifting within the firm

3.3. Taxes

3.4. The underinvestment problem

3.5. Information problems

3.6. Free cash flow problems

3.7. Hedging motives and methods

4. The costs of risk management

5. Evidence on corporate hedging

5.1. Investment policy

5.2. Financing policy

5.3. Managerial incentives

5.4. Firm size

5.5. Taxes

5.6. Ownership structure

6. Conclusion

References

Abstract

Recent developments in corporate ...