Rationales for Corporate Risk Management - A Critical Literature Review

Monda, Barbara; Giorgino, Marco; Modolin, Ileana

doi:10.2139/ssrn.2203546

Cited by 5 publications

(8 citation statements)

References 145 publications

(280 reference statements)

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“…If the number of assets included in the portfolio is high and these assets are not perfectly correlated, the unsystematic component of the portfolio risk diminishes. The CAPM shows that investors only get compensated for holding systematic risk, since the firm-specific component of risk can be eliminated through diversification (Monda, Giorgino, & Modolin, 2013).Thus, agency problems between shareholders and managers arise just because managers face total risk (systematic risk as well as unsystematic risk), whereas shareholders face only the systematic component of total risk, since they can diversify away the firm-specific risk of their positions. Hence, the risk associated with managers' income is closely related to the firm's risk.…”

Section: Capital Asset Pricing Modelmentioning

confidence: 99%

Effect of Financial Risk Management on Financial Performance of Firms Listed in the Nairobi Securities Exchange

Kibera

Muturi

2018

AJF

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Purpose: The main purpose of this study was to determine the effect of financial risk management on financial performance of firms listed at the Nairobi Securities exchange.Methodology: The study employed descriptive design. The target population for the study was all the chief financial officers of all the 61 listed firms at the Nairobi Securities Exchange. The study employed a census survey of the 61 CFO’s of the listed firms at the NSE. The study utilized a semi-structured questionnaire to collect primary data. . The collected data was coded into SPSS 23 for subsequent descriptive and inferential statistics. Descriptive statistics was presented through frequencies, percentages, means and standard deviation. The inferential statistics was presented using regression model summary and correlation coefficients. The findings were further presented using charts and tables.Results: The findings of the research showed there was a positive and significant association between financial risk management strategies as evidenced by the coefficient of determination R2 = .205. The results of the study further indicated that asset structuring management and risk avoidance practices had a positive and significant influence on financial performance. The study concluded that with proper asset structuring management practices a firm can improve its performance on the stock exchange. Further the research findings showed that risk avoidance practices can positively enhance the financial profitability of listed firms.Unique Contribution to Theory, Policy and Practice: The study recommends that listed firms should enhance their financial risk management practices to be in tandem with growing international standards and globalization. The study also recommends that the regulatory authorities should establish policies laws that take note of the risks that company take and provide them with certain incentives on the bourse.

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Section: Capital Asset Pricing Modelmentioning

confidence: 99%

Effect of Financial Risk Management on Financial Performance of Firms Listed in the Nairobi Securities Exchange

Kibera

Muturi

2018

AJF

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“…Perusahaan yang memiliki financial leverage yang tinggi berarti memiliki utang yang tinggi dan menyebabkan risiko yang tinggi ketika melunasinya terutama utang dalam bentuk valuta asing, sehingga perusahaan melakukan hedging untuk meminimalkan risiko tersebut (Gewar & Suryantini, 2020;Jayanti & Yadnya, 2020;Mahardini et al, 2020). Teori keagenan menjelaskan bahwa perusahaan dengan rasio utang terhadap ekuitas yang tinggi melakukan hedging untuk mengurangi biaya keagenan yang dimilikinya (Monda et al, 2013).Teori ekonomi keuangan Modigliani & Miller (1958) Faktor ketiga adalah likuiditas. Likuiditas perusahaan yang tinggi menunjukkan perusahaan tersebut likuid karena dapat membayar utang jangka pendeknya tepat waktu Sasmita dan Hartono, (2019) atau aset lancar perusahaan lebih besar daripada jumlah utang (Mahasari & Rahyuda, 2020).…”

Section: Pendahuluanunclassified

Mengapa Perusahaan Manufaktur Di Indonesia Melakukan Keputusan Hedging?

Arinal Mirdha,

Muhammad Arfan,

Indayani

2023

JRAK

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Purpose: This study aims to examine the factors that influence manufacturing companies in Indonesia to make hedging decisions Methodology/approach: The study selected 179 companies as the population and 124 companies as a sample. The analysis unit used is a manufacturing company listed on the Indonesia Stock Exchange for the 2018-2020 observation year, so that the observation unit amounted to 372 observations. The study sample was selected using a simple random sampling technique. The source of this research data is secondary data obtained from the publication of the company's annual financial statements and analyzed using logistic regression. Findings: The results showed that growth opportunities and financial leverage are factors that motivate company managers to make hedging decisions, while likiudity is a factor that mitigates managers to make hedging decisions. On the other hand, cash flow volatility is a factor that is unable to explain hedging decisions. Practical implications: Practical implications in this study suggest that when making hedging decisions, manufacturing company managers should consider factors that influence hedging decisions, namely growth opportunities, financial leverage, and liquidity. Additionally, investors and creditors should also take into account variables or factors that influence manager decisions on hedging before deciding to invest or provide loans. Originality/value: This study used simple random sampling techniques in determining research samples, in contrast to previous studies that used purposive sampling techniques. This aims to overcome the weaknesses of purposive sampling techniques that are not able to generalize results of study to the entire population.

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“…The present paper attempts to fill this gap by bringing new evidence in the empirical literature by analyzing a mediating effect of a firm's risk on the relationship of derivative usage with firm value. As, risk management theorists state that derivatives increase firm value by reducing firm's risk (Froot et al, 1993;Tufano, 1998;Monda et al, 2013;Bartram et al, 2011;Phan et al, 2014). Literature, however, has shown a significant association between derivative usage and firm value, but empirical analysis of 'how' this relationship occurs is still unavailable.…”

Section: Review Of Literaturementioning

confidence: 99%

Corporate Derivatives and Risk Management: A Moderated Mediation Test

Alam

Afza

2021

pjsr

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The present study contributes to existing literature by empirically testing the moderated mediating role of firm’s risk on the relationship between derivative usage and firm value by gathering sample data of Pakistani and Malaysian non-financial firms. By using Bootstrap technique of Hayes (2015), study finds that the use of derivative has both direct and indirect effect on firm value in Pakistan, contrary to Malaysia, as derivative usage significantly enhances firm value by reducing firm’s risk. Findings remain same for both foreign currency and interest rate derivative usage that firm’s risk significantly mediates the relationship between derivative usage and firm value in Pakistani non-financial corporations. Keywords: Derivative Usage, Firm Value, Firm's Risk, Moderated Mediation, Pakistan, Malaysia

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Rationales for Corporate Risk Management - A Critical Literature Review

Cited by 5 publications

References 145 publications

Effect of Financial Risk Management on Financial Performance of Firms Listed in the Nairobi Securities Exchange

Effect of Financial Risk Management on Financial Performance of Firms Listed in the Nairobi Securities Exchange

Mengapa Perusahaan Manufaktur Di Indonesia Melakukan Keputusan Hedging?

Corporate Derivatives and Risk Management: A Moderated Mediation Test

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