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Fair Value Information and Risk Management: the Moderating Effect of Corporate Governance

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  • Hui-Wen Hsu

Abstract

This project examines whether the fair value information under SFAS ( 157 affects corporate credit risk. Moreover, I further investigate whether managers change their risk management behavior driven by fair value measurement. Finally, in light of the evidence offered by the prior studies indicating that better corporate governance will lead to better risk management, this study expects that the relationship between fair value information and risk management may be moderated by corporate governance. Using a US sample drawn from 2008 to 2011, the results of this paper show that firms with more Level 3 fair values have higher credit risk. The results also indicate that the positive relationship between Level 3 fair values and credit risk is attenuated for firms with high corporate governance. Finally, the results show firms with more Level 1 fair values have a higher probability to use hedging only for firms with higher corporate governance.JEL classification numbers: G31, G34, M41Keywords: Fair value information, risk management, and corporate governance

Suggested Citation

  • Hui-Wen Hsu, 2017. "Fair Value Information and Risk Management: the Moderating Effect of Corporate Governance," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 7(4), pages 1-4.
    • Handle: RePEc:spt:apfiba:v:7:y:2017:i:4:f:7_4_4
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    More about this item

    Keywords

    fair value information; risk management; and corporate governance;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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