Title

On-Balance-Sheet Duration Hedging and Firm Value

Abstract

In this study we consider the determinants and effects of on-balance-sheet duration hedging for non-financial US firms. The difference between the duration of assets and liabilities, or duration gap, is negatively related to growth opportunities, and positively related to profitability, corporate cash holdings, and managerial ownership. We find that both a lower duration gap and a lower absolute value of duration gap are associated with higher firm values. Moreover, we find some evidence that firms with larger duration gaps performed worse during the market-wide liquidity shock accompanying the Lehman Brothers bankruptcy.

Department(s)

Business and Information Technology

Keywords and Phrases

Duration gap; Liquidity; Valuation

International Standard Serial Number (ISSN)

1057-5219

Document Type

Article - Journal

Document Version

Citation

File Type

text

Language(s)

English

Rights

© 2020 Elsevier Inc., All rights reserved.

Publication Date

Oct 2020

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