On-Balance-Sheet Duration Hedging and Firm Value
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.
Dai, Y., Guo, L., Zhang, H., & Liu, Y. (2020). On-Balance-Sheet Duration Hedging and Firm Value. International Review of Financial Analysis, 71 Elsevier.
The definitive version is available at https://doi.org/10.1016/j.irfa.2020.101517
Business and Information Technology
Keywords and Phrases
Duration gap; Liquidity; Valuation
International Standard Serial Number (ISSN)
Article - Journal
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