On-balance-sheet duration hedging and firm value

Ya Dai, Liang Guo, Hongxian Zhang and Yu Liu

International Review of Financial Analysis, 2020, vol. 71, issue C

Abstract: In this study we consider the determinants and effects of on-balance-sheet duration hedging for non-financial US firms. The difference between the duration of assets and liabilities, or duration gap, is negatively related to growth opportunities, and positively related to profitability, corporate cash holdings, and managerial ownership. We find that both a lower duration gap and a lower absolute value of duration gap are associated with higher firm values. Moreover, we find some evidence that firms with larger duration gaps performed worse during the market-wide liquidity shock accompanying the Lehman Brothers bankruptcy.

Keywords: Duration gap; Valuation; Liquidity (search for similar items in EconPapers)
JEL-codes: G30 G32 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:71:y:2020:i:c:s1057521920301617

DOI: 10.1016/j.irfa.2020.101517

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