Bank borrowing and corporate risk management

Aziz A. Lookman

Journal of Financial Intermediation, 2009, vol. 18, issue 4, 632-649

Abstract: We examine whether banks better protect themselves against risk-shifting as compared to non-bank lenders by comparing risk management polices across firms that borrow from different lenders using a unique, hand-collected data set of hedging and borrowing practices. Consistent with banks being effective monitors, we find hedging is positively associated with the proportion of bank debt amongst firms with large risk-shifting incentives. We present descriptive evidence showing that banks use covenants as one of the channels to mitigate risk-shifting.

Keywords: Hedging; Risk-shifting; Bank; debt; Covenants; Risk; management (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:18:y:2009:i:4:p:632-649

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