Risk Management: Coordinating Corporate Investment and Financing Policies

@inproceedings{Froot1992RiskMC,
  title={Risk Management: Coordinating Corporate Investment and Financing Policies},
  author={Kenneth Alan Froot and David Stuart Scharfstein and Joanna Crown Stein},
  year={1992}
}
This paper develops a general framework for analyzing corporate risk management policies. We begin by observing that if external sources of finance are more costly to corporations than internally generated funds, there will typically be a benefit to hedging: hedging adds value to the extent that it helps ensure that a corporation has sufficient internal funds available to take advantage of attractive investment opportunities. We then argue that this simple observation has wide-ranging… CONTINUE READING
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