Browsing by Subject "Zinsänderungsrisiko"

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Corporate risk management : new empirical evidence from foreign exchange and interest rate risk
(2019) Hecht, Andreas; Hachmeister, Dirk
Contemporary corporate risk management with its diverse facets and categories commonly involves the usage of derivative instruments. Most of the relevant empirical literature originates from commodity risk management, even though the most important risk categories in terms of derivative usage are foreign exchange (FX) and interest rate (IR) risk. Empirical evidence in these areas is rare and often relies on alternative indicators of derivative usage due to a limited availability of adequate data. We close this gap in the literature and introduce two innovative and hand-collected datasets – one for FX and one for IR risk – from the unexplored regulatory environment in France. Based on an unprecedented data granularity with advanced exposure and derivative usage information, we examine the preeminent topics on the relevance and the determinants (together with the identification) of speculative activities in corporate FX and IR risk management in three empirical papers. Chapter 2 “How do Firms Manage Their Foreign Exchange Exposure?” concentrates on how firms use derivative transactions to handle their FX risk. Regarding the composition of FX exposure, we find the exposure before hedging to be predominantly long, i.e., driven by FX-receivables and forecasted FX-sales, which is on average [median] hedged to about 90 [49] percent with mostly short derivative instruments. Regarding the relevance of speculative elements, we evaluate whether firms decrease, increase or keep their FX exposure stable with derivative instruments and find that about 61 percent of the taken currency positions can be classified as risk-decreasing and about 39 percent as risk-increasing/risk-constant. Instead of solely evaluating the number of occurrences, we further relate the exposure before hedging per currency position to overall firm exposure and find that approximately 80 percent of total FX exposure are managed using risk-decreasing strategies and 20 percent of total firm exposure are managed using risk-increasing/-constant strategies. We further address the documented impact of prior outcomes on hedging decisions with the informational advantage of our FX dataset. We use regression analyses to find supportive evidence that in response to benchmark losses, management hedges significantly more of its exposure and adjusts the hedge ratio closer to its benchmark. In addition, we analyze whether the impact of prior hedging outcomes is subject to the choice of risk-decreasing vs. risk-increasing strategies. With our finding that previous benchmark losses are only considered in risk-increasing strategies, where the exposure is again decreased following prior benchmark losses, but not in risk-decreasing strategies, we complement the growing literature on the relevance of prior hedging outcomes. In chapter 3 “Identifying Corporate Speculation Reading Public Disclosures – Why Firms Increase Risk“, we first examine whether the advanced disclosures in FX risk management of our dataset enable the identification of speculation reading openly available corporate publications. For the first time, the detailed information on FX exposures before and after hedging with corresponding hedged amounts allows for the calculation of firm-, currency-, and year-specific hedge ratios to quantitatively identify speculation as activity that increases or keeps currency-specific FX exposure constant reading public corporate disclosures. Further, we examine the determining factors of speculative activities and find through regression analyses that frequent speculators are smaller, possess more growth opportunities and have lower internal resources. While several theories for speculative behavior have been tested empirically several times, our findings indicate unprecedented empirical evidence for the convexity theories in an FX environment. Chapter 4 “How Do Firms Manage Their Interest Rate Exposure?” is dedicated to corporate interest rate risk management and how firms manage the IR risk with the differing subcategories of cash flow and fair value risk. Similar to FX risk, we evaluate the relevance and determinants of speculation in IR risk management. We observe that speculative elements are more pronounced in IR compared to FX risk management when finding that 63 percent of IR firm exposure are managed using risk-decreasing strategies, whereas 37 percent are managed using risk-increasing/-constant strategies. Contrary to the results in the FX setting, we observe frequent IR-speculators to have less growth opportunities and higher short- and long-term liquidity. We finally combine the FX and IR dataset to examine potential interactions. We find that firms seem to specialize in either FX or IR speculation and that the exposure of frequent speculators is significantly smaller for both risk categories.