Does risk shifting incentives or risk management incentives dominate when firms rollover large amounts of maturing debt? The empirical evidence supports the risk management hypothesis by identifying a hump-shaped relation between long-term debt maturity and firm risk. Using...

We extend the literature on how managerial traits relate to corporate choices by documenting that firms run by female CEOs have lower leverage, less volatile earnings, and a higher chance of survival than otherwise similar firms run by male CEOs. Additionally, transitions from male to female...

Defined-benefit (DB) pension funds, often underfunded, rely on the legal obligation of their sponsor to secure pension rights for individuals.Because that guarantee is risky, ways must be found to secure the pension promises. This paper is the first to identify the optimal pension fund...

We hypothesize that the quality of market risk disclosure mandated by the U.S. Securities and Exchange Commission Financial Reporting Release No. 48 (FRR No. 48) provides useful information for assessing risk management effectiveness. Measuring risk disclosure quality as the degree of...

Derivatives are financial instruments that are mainly used to protect against and manage risks, very often also serve arbitrage or investment purpose, provides various advantages compared to securities. Derivatives are various types and can differentiated by how they are traded, the underlying...

While discussing risk issues someone told me as a joke that she wished the world were riskless and the fact that risk were present in any instance in our lives was a rather unfortunate circumstance. But would we be really better off in a riskless world?Although it may appear to be a trivial...

In the Capital Asset Pricing Model (CAPM) the β-parameter is related to the risk level of an asset and takes on values ranging around 1. I argue that β is also a function of the monetary risks the asset is exposed to, hence monetary risk can be estimated from betas. On the other hand, if we...

If two investments have the same payoff covariance with the market but one has higher expected payoff, which asset according to the CAPM has most risk? One answer is that as far as risk goes the two assets are the same, because they have the same covariance with the market. The correct answer,...

The interaction of capital and risk for trading and treasury units is of primary interest in the corporate governance of banks as it links operational profitability and strategic risk management. During the financial crisis, several banks' trading units suffered significantly higher losses than...

We present a stochastic simulation model for estimating forward-looking corporate probability of default and loss given default. We formulate the model in a discrete time frame, apply capital-budgeting techniques to define the relationships that identify the default condition, and solve the...