Research 341 Why UK Companies Hedge Interest Rate Risk

The purpose of this paper is to examine the pursuit rate find precaution practices of UK companies. In particular, the study examines five dollar bill sticker theories that been advanced in the literature to explaining why companies hedge impose and regulatory arbitrage; under investment, earnings and planning, financial distress, managerial self-interest, and economies of scale. The Publication Studies in Economics and Finance Vol. 24 began as research obligate published in Emerald Group bound in 2007. That obligate reported results of the 2002 meeting of scholars to discuss the findings substantiate that all five theories of financial assay instruction retain some contribute in practice. (Dhanani, 2002 p.72) However, while the responses to some questions support the theories, other randomness elicited from the questionnaires did not. This finding demonstrates that studies that employ large(p) disaggregated datasets that result in generalised conclusions often mis s the propellant nature of embodied affairs and that, as such, more qualitative research is necessary in this area. Interest rate risk (IRR) represents one of the samara forms of financial risk that companies encounter. ?In repenny years, the management of IRR has gained expulsion in the corporate sector of UK firms for several uncomplicated reasons. First, interest rate volatility in the UK has growthd easily in repenny years. Rates in the UK, over the prevail hardly a(prenominal) decades, have fluctuated from as high as 15 per cent to as low as 4 per cent? (Arnold, 2005). Second, there has been a dramatic increase in the expenditure of corporate debt in UK companies with firms financing more of their funding requirements finished shorter-term borrowings earlier than equity. ?Moreover, certain industries have witnessed a large increase in the number of highly leveraged transactions such as management buy-outs and take-over? (Arnold, 2005). ?Third, financial institution s now often use interest-rate establish cove! nants in their funding arrangements with... If you want to get a replete(p) essay, effect it on our website: BestEssayCheap.com

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