A view inside corporate risk management
Journal Article (Journal Article)
Why do firms manage risk? According to various theories, firms hedge to mitigate credit rationing, to alleviate information asymmetry, and to reduce the risk of financial distress. However, empirical support for these theories is mixed. Our paper addresses the “why” by directly asking the managers that make risk management decisions. Our results suggest that personal risk aversion in combination with other executive traits plays a key role in hedging. Our analysis also indicates that risk-averse executives are more likely to rely on (more conservative) fat-tailed distributions to estimate risk exposure. While most theories of risk management ignore the human dimension, our results suggest that managerial traits play an important role.
Full Text
Duke Authors
Cited Authors
- Bodnar, GM; Giambona, E; Graham, JR; Harvey, CR
Published Date
- November 1, 2019
Published In
Volume / Issue
- 65 / 11
Start / End Page
- 5001 - 5026
Electronic International Standard Serial Number (EISSN)
- 1526-5501
International Standard Serial Number (ISSN)
- 0025-1909
Digital Object Identifier (DOI)
- 10.1287/mnsc.2018.3081
Citation Source
- Scopus