Corporate Risk Management and Information Disclosure

Emmanuelle Gabillon () and Jean-Claude Gabillon

Finance, 2012, vol. 33, issue 2, 101-128

Abstract: In this paper, we propose a theory linking corporate risk management, information disclosure and cost of capital. We show that the hedging strategy of a value-maximizing firm can be an instrument of its disclosure policy. We emphasize that optimal hedging strategy does not systematically eliminate all risks but distinguishes between undesired risks that have to be hedged because they are a source of noise, and risks that should not be eliminated because they have an informational content. We show that optimal risk management, by eliminating noise, reduces the variability of the firm?s cost of capital, thereby creating value. Moreover, having shown that optimal hedging policy depends on whether hedge transactions are disclosed or not, we then discuss the optimality of disclosure requirements in hedge accounting standards.

Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.cairn.info/load_pdf.php?ID_ARTICLE=FINA_332_0101 (application/pdf)
http://www.cairn.info/revue-finance-2012-2-page-101.htm (text/html)
free

Related works:
Working Paper: Corporate risk management and information disclosure (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cai:finpug:fina_332_0101

Access Statistics for this article

More articles in Finance from Presses universitaires de Grenoble
Bibliographic data for series maintained by Jean-Baptiste de Vathaire ().