EFZG working paper series, No. 13, 2007.
Other
How do Croatian Companies make Corporate Risk Management Decisions: Evidence from the Field
Danijela Miloš Sprčić
; Faculty of Economics and Business, University of Zagreb
Abstract
According to the Capital Asset Pricing Model and the Modigliani-Miller theorem, corporate risk management
is irrelevant to the value of the firm. However, it is apparent that managers are constantly engaged in hedging
activities that are directed at the reduction of corporate risks. As an explanation for this clash between theory
and practice, imperfections in the capital market are used to argue for the relevance of corporate risk
management function. This paper analyses corporate risk management practices and decision to hedge in large
Croatian non-financial companies. It explores if decision to hedge corporate risks in the analysed companies is
a function of several firm’s characteristics that have been proven as relevant in making risk management
decisions.
Keywords
corporate risk management decision; hedging rationales; shareholder value maximisation; managers’ private utility maximisation; large Croatian non-financial companies
Hrčak ID:
137178
URI
Publication date:
10.7.2007.
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