Hedging or Market Timing? Selecting the Interest Rate Exposure of Corporate Debt
Year: 2005
Type: article
Abstract: ABSTRACT This paper examines whether firms are hedging or timing the market when selecting the interest rate exposure of their new debt issuances. I use a more accurate measure of the interest rate exposure chosen by firms by combining the initial exposure of newly issued debt securities with their use of interest rate swaps. The results indicate that the final interest rate exposure is largely driven by the slope of the yield curve at the time the debt is issued. These results suggest that interest rate risk management practices are primarily driven by speculation or myopia, not hedging considerations.
Source: The Journal of Finance
Author: MICHAEL FAULKENDER
Institution: Washington University in St. Louis
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3125043003