EconPapers    
Economics at your fingertips  
 

Alleviating Coordination Problems and Regulatory Constraints through Financial Risk Management

Marcel Boyer (), M. Martin Boyer () and René Garcia ()

CIRANO Working Papers from CIRANO

Abstract: We characterize a firm as a nexus of activities and projects with their associated cash flow distributions across states of the world and time periods. We propose a characterization of the firm where variations in the market price of risk induce adjustments in the value-maximizing combination of projects. Changing the portfolio of projects generates coordination costs. We propose a new role for financial risk management based on the idea that the use of financial derivatives may reduce coordination costs. We find empirical support for this new rationale for the use of financial derivatives, after controlling for the traditional variables explaining the need for financial risk management. Nous caractérisons une entreprise comme un ensemble d'activités et de projets avec leurs flux financiers par état et période. Nous proposons une caractérisation de l'entreprise où les variations dans le prix de marché du risque induisent des ajustements dans la combinaison optimale d'activités ou de projets. Les modifications du portefeuille de projets génèrent des coûts de coordination. Nous proposons un nouveau rôle pour la gestion financière des risques en proposant que l'utilisation de titres financiers puisse réduire les coûts de coordination. Ce nouveau rôle de la gestion financière des risques est vérifié empiriquement, une fois pris en compte les facteurs explicatifs traditionnels de la gestion financière des risques.

Keywords: Risk Management; firm value; coordination problems; hedging; value at risk.; Gestion des risques; valeur d'entreprise; problèmes de coordination; hedging; valeur à risque. (search for similar items in EconPapers)
Date: 2011-05-01
New Economics Papers: this item is included in nep-ban, nep-bec, nep-ppm and nep-rmg
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://cirano.qc.ca/files/publications/2011s-48.pdf

Related works:
Journal Article: Alleviating Coordination Problems and Regulatory Constraints Through Financial Risk Management (2013) Downloads
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:cir:cirwor:2011s-48

Access Statistics for this paper

More papers in CIRANO Working Papers from CIRANO Contact information at EDIRC.
Bibliographic data for series maintained by Webmaster ().

 
Page updated 2020-05-02
Handle: RePEc:cir:cirwor:2011s-48