학술대회/행사
학술대회안내
[2008년 제 2차] Corporate Risk Management under Information Asymmet
작성자 : 관리자
조회수 : 1084
게시일 :
2008-05-30
This paper examines the financial and operational hedging activities of 74 pharmaceutical and biotech firms from 2001 to 2003. Risk management is particularly important for the pharmaceutical and biotech industry since firms in this industry are subject to high level of information asymmetry stemming from R&D investments. We find evidence supporting the theory of Froot, Scharfstein and Stein (1993) that financial hedging helps mitigate the under-investment problem. The likelihood of using financial derivatives is increasing with R&D and advertising investments. The usage of financial derivatives is associated with greater firm value, and the value enhancement is larger for firms subject to greater information asymmetry and larger growth opportunities. The results are robust with respect to alternative performance measures and the endogeneity problem. In addition, we find that financial and operational hedging are complementary.