The Interest Rate Exposure of Nonfinancial Corporations

Abstract: Many interest rates are as volatile as exchange rates and thus represent an equally important source of risk for corporations. While this is true not only for financial institutions, but for other corporations as well, little is known about the interest rate exposure of nonfinancial firms. Consequently, this paper investigates the impact of interest rate risk on a large sample of nonfinancial corporations. It presents empirical evidence for the existence of linear and nonlinear exposures with regard to movements in various interest rate variables. The interest rate exposure is empirically determined by measures of firm liquidity, but not by financial leverage.

Keywords: Interest rates; exposure; derivatives; risk management; corporate finance; capital markets (search for similar items in EconPapers)
JEL-codes: G3 F4 F3 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn and nep-mac
Date: Written 2001-12-18
Note: Type of Document - PDF; prepared on PC; pages: 31. European Finance Review, Vol. 6, No. 1, 101-125.
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