Naslov
The Relevance of Corporate Risk Management Function and Its Influence on the Company’s Value

Autori
Miloš Sprčić, Danijela ; Tekavčič Metka ; Šević Željko

Izvornik
Računovodstvo – časopis za Računovodstvo, Reviziju i Poslovne financije (ISSN0023-2394) 5-6 (2007); 5-23

Vrsta, podvrsta i kategorija rada
Radovi u časopisima, članak, znanstveni

Ključne riječi
corporate risk management; value of the company

Sažetak
For a long time it was believed that corporate risk management is irrelevant to the value of the firm and the arguments in favour of the irrelevance were based on the Capital Asset Pricing Model and the Modigliani-Miller theorem. However, it is apparent that managers are constantly engaged in hedging activities that are directed at the reduction of unsystematic risk. In the real world, financial managers and treasurers give a great deal of thought to matters of capital structure and securities design. Additionally, the corporate use of derivatives in hedging interest rate, currency, and commodity price risks is widespread and growing. 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. Scholars have constructed two classes of explanations or determinants for management concern with hedging of non-systematic risk, which overcome the irrelevancy arguments of modern portfolio and corporate finance theory. The first class of explanations focuses on risk management as a mean to maximise shareholder value, and the second focuses on risk management as a mean to maximise managers’ private utility. This paper presents the extensive literature survey based both on theoretical rationales for hedging as well as the empirical evidence that support the implications of the theory regarding the arguments for the corporate risk management relevance and its influence on the company’s value.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

POVEZANOST RADA