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The Interest Rate Exposure of Nonfinancial Corporations

The Interest Rate Exposure of Nonfinancial Corporations Many interest rates are as volatile as exchange rates and thus represent an equally important source of risk for corporations. While this is true not only for financial institutions, but for other corporations as well, little is known about the interest rateexposure of nonfinancial firms. Consequently, this paper investigates the impact of interest rate risk on a large sample of nonfinancial corporations. It presents empirical evidence for the existence of linear and nonlinear exposures with regard to movements invarious interest rate variables. The interest rate exposure is empirically determinedbymeasures of firm liquidity, but not by financial leverage. JEL classification codes: G3, F4, F3 http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Finance Oxford University Press

The Interest Rate Exposure of Nonfinancial Corporations

Review of Finance , Volume 6 (1) – Jan 1, 2002

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Publisher
Oxford University Press
Copyright
© Published by Oxford University Press.
ISSN
1572-3097
eISSN
1573-692X
DOI
10.1023/A:1015024825914
Publisher site
See Article on Publisher Site

Abstract

Many interest rates are as volatile as exchange rates and thus represent an equally important source of risk for corporations. While this is true not only for financial institutions, but for other corporations as well, little is known about the interest rateexposure of nonfinancial firms. Consequently, this paper investigates the impact of interest rate risk on a large sample of nonfinancial corporations. It presents empirical evidence for the existence of linear and nonlinear exposures with regard to movements invarious interest rate variables. The interest rate exposure is empirically determinedbymeasures of firm liquidity, but not by financial leverage. JEL classification codes: G3, F4, F3

Journal

Review of FinanceOxford University Press

Published: Jan 1, 2002

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