Date of this Version
The Journal of Finance
We provide an explanation for hedging as a means of allocating rather than reducing risk. We argue that firms facing a total risk constraint optimally allocate risk by reducing (increasing) exposure to risks providing zero (positive) economic rents. Our evidence suggests that mutual thrifts which convert to stock institutions reduce interestrate risk through improved balance sheet maturity matching and increased derivatives use at the time of conversion. This interest-rate risk reduction is followed by slower growth in credit risk. Post-conversion, risk management activities are significantly related to growth capacity and management compensation structure attained at conversion.
This is the peer reviewed version of the following article: Schrand, Catherine, and Unal Haluk. "Hedging and Coordinated Risk Management: Evidence from Thrift Conversions." The Journal of Finance 53.3 (1998): 979-1013. Web., which has been published in final form at http://www.jstor.org/stable/117384. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving http://olabout.wiley.com/WileyCDA/Section/id-820227.html#terms.
Schrand, C. M., & Unal, H. (1998). Hedging and Coordinated Risk Management: Evidence From Thrift Conversions. The Journal of Finance, 53 (3), 979-1013. Retrieved from https://repository.upenn.edu/accounting_papers/47
Date Posted: 27 November 2017
This document has been peer reviewed.