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comments and suggestions. All remaining errors are mine. Abstract This paper develops a theory of corporate risk-management in the presence of deadweight losses caused by financial distress and tests its implications using a comprehensive dataset of over 3000 non-financial firms. Unlike extant theories that explain only the ex-ante risk-management behavior(More)
This note extends the concept of a coherent risk measure to make it more consistent with a fir-m's capital budgeting perspective. A coherent risk measure defines the risk of a portfolio to be that amount of cash that must be added to the portfolio such that it becomes acceptable to a regulator. As such, a coherent risk measure implicitly assumes that the(More)
of Minnesota. Any remaining errors are my own. Abstract Dislocations occur when financial markets, operating under stressful conditions, experience large, widespread asset mispricings. This study documents systematic dislocations in world capital markets and the importance of their fluctuations for expected asset returns. Our novel, model-free measure of(More)
This paper shows the relation between CEO ownership and firm valuation hinges critically on the strength of external governance (EG). The relation is hump shaped when EG is weak, but is insignificant when EG is strong. The results imply that CEO ownership and EG are substitutes in mitigating agency problems when ownership is low. However, very high levels(More)
Measuring connectedness among financial institutions is an important aspect of monitoring systemwide risk development and identifying systemically risky institutions. In this work, we present a novel statistical method for measuring connectivity among firms using publicly available time series of firm-level characteristics. The proposed method relies on a(More)
  • John Ruben Huck, Robert F. Dittmar, +19 authors Christina Zafeiridou
  • 2016
DEDICATION To my loving parents, John G. and Roxana. Thank you for encouraging my curiosity and supporting me over the years. To my wife, Laura. You are the love of my life. I am forever grateful for your sacrifice, patience, understanding, love, and support. To my son, Lucas. You have brought me great joy and a welcome distraction over the past nine(More)
The views expressed here are those of the author(s) and not necessarily those of the Federal Deposit Insurance Corporation Abstract I analyze the effects of bank characteristics and macroeconomic shocks on interest rate risk-management behavior of commercial banks. My findings are consistent with hedging theories based on cost of financial distress and(More)
We show that banks significantly under-report the risk in their trading book when they have lower equity capital. Specifically, a decrease in a bank's equity capital results in substantially more violations of its self-reported risk levels in the following quarter. The under-reporting is especially high during the critical periods of high systemic risk and(More)
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