Catálogo de publicaciones - libros

The finance literature describes risk management as being concerned with identifying and managing a firm’s exposure to financial risk. Corporate governance is often described as the set of rules, structures and procedures by which investors assure themselves of getting a return on their investment and ensure that managers do not misuse the investor’s funds. This essay addresses the connection between risk management and corporate governance and the public corporation. We argue that risk management and risk management products help ensure the survival of the firm and thereby support broad public policy objectives — objectives beyond the immediate interests of the owners of the company and a narrow financial objective of shareholder wealth maximization.

The standard approach to the risk analysis of fixed income portfolios involves a mapping of exposures into representative duration buckets. This approach does not provide a transparent description of the portfolio risk in the case of leveraged portfolios, particularly in the case of portfolios whose primary intent is to trade convexity. In this paper, an alternative approach, based upon Level, Slope and Curvature yield curve factors, is described. The alternative approach offers a linear model of non-linear trading strategies.

This article provides the theoretical underpinning for why risk should be managed at all and why it should sensibly be managed on the level of the firm rather than by investors themselves. The analysis uses the perfect world of Modigliani-Miller as a starting point of the analysis and establishes in this context that risk management is equivalent to any other change in the firm’s financial structure in its neutral effect on shareholder value. Corporate risk management is subsequently motivated by market imperfections such as asymmetric information, transaction costs, non-neutral taxes and limited access to external financing. A discussion of the empirical literature on derivative usage highlights the practical relevance of the various risk management motives. Hedging as a means of providing sufficient internal funding for vital investments has overall the most intuitive appeal and is also compatible with the widely used Cash-Flow-at-Risk methodology.

Managing risks does not necessarily mean reducing risks but weighing up these risks against the profits and considering the impacts on the equity capital needed to cover the risk (and on the cost of capital). Risk analysis and risk aggregation are necessary tasks of a value-based management as they help to assess the well-funded goodwill of a company. An important widening can be made in taking into account the systematic as well as the idiosyncratic risks. In doing so, the management can quantify the effects of a risk reduction (e.g. by transferring it) on the value of a company. Alternatively to the Capital-Asset-Pricing-Model the capital costs in imperfect markets can be determined in dependence to the own capital funds needed, which is analyzed by the aggregation of all risks in the context of planning.

The globalization of financial markets and several spectacular corporate crises were the prime forces that led the German legislator to pass the KonTraG, a law requiring companies to implement risk management systems. In order to harness this change as a value driver for companies, the article introduces a holistic concept of entrepreneurial Chance- and Risk-Management, which is designed to fulfill the dual requirements of the legislator on the one hand and of corporate management needs on the other.

In this chapter we emphasize the importance of recognizing the interdependence among exchange rates, interest rates and inflation rates in measuring corporate exposure. First, several issues relating to management’s views of the macroeconomic environment, as well as the firm’s objective and structure will be discussed. These issues must be addressed before multiple regression analysis can be implemented with the purpose of estimating exposures. Volvo Cars is then used to illustrate how economic exposure to exchange rates and other macroeconomic variables is estimated using quarterly cashflows as the firm’s target variable. The use of cash flow exposure coefficients for evaluating exposure and choosing currency denomination of liabilities is discussed, and an out-of-sample analysis of the estimated exposure coefficients is carried out.

The paper reports the results of an empirical study into the foreign-exchange-risk management of large German non-financial corporations. The firms’ managers were asked about the measurement of exchange risk, about their management strategies, and about organizational issues. The majority of the firms are concerned about managing transaction exposure. Most firms adopted a selective hedging strategy based on exchange-rate forecasts. Only a small minority of firms does not hedge foreign-exchange risk at all, and only few companies hedge their transaction exposure completely. The survey found a number of discrepancies between the positions of the academic literature and corporate practice. The most interesting finding, however, is the widespread use of exchange-rate forecasts and of exchange-risk management strategies based on forecasts (selective hedging).

This paper provides new evidence on the issue of whether or not there is a contemporaneous relation between the dollar and firm value as measured with stock returns. Prior studies have failed to find any short-term relation between the value of the dollar and the stock price reactions of U.S. multinational firms. Using a different methodology than previous studies, we find a significant average negative drop in stock price across 430 firms on the day that Thailand devalued the bhat, initiating Asia’s financial crisis. We also show that this measure of exposure is related to both firm size and several proxies for intensity of foreign and Asian operations.

In addition to catastrophe and operational risks like e.g. the terrorist attacks on the World Trade Center airlines are exposed to substantial capital market risks. This study examines the cases of three major airlines including Lufthansa, United Airlines, and Qantas. Their risk profiles are analyzed with respect to commodity and exchange rate risks by applying the “Earnings at Risk”-concept to the profit and loss statements of the year 2003. Furthermore, potential hedging strategies are explored. It turns out that airlines are especially sensitive to movements of the oil price. However, hedges can provide (partial) protection against adverse movements of the risk factors.

In addition to catastrophe and operational risks like e.g. the terrorist attacks on the World Trade Center airlines are exposed to substantial capital market risks. This study examines the cases of three major airlines including Lufthansa, United Airlines, and Qantas. Their risk profiles are analyzed with respect to commodity and exchange rate risks by applying the “Earnings at Risk”-concept to the profit and loss statements of the year 2003. Furthermore, potential hedging strategies are explored. It turns out that airlines are especially sensitive to movements of the oil price. However, hedges can provide (partial) protection against adverse movements of the risk factors.