Template-Type: ReDIF-Paper 1.0
Author-Name: Ryan Niladri Banerjee
Author-X-Name-First: Ryan Niladri
Author-X-Name-Last: Banerjee
Author-Name: Julián Caballero
Author-X-Name-First: Julián
Author-X-Name-Last: Caballero
Author-Name: Enisse Kharroubi
Author-X-Name-First: Enisse
Author-X-Name-Last: Kharroubi
Author-Name: Renée Spigt
Author-X-Name-First: Renée
Author-X-Name-Last: Spigt
Author-Name: Egon Zakrajsek
Author-X-Name-First: Egon
Author-X-Name-Last: Zakrajsek
Title: Interest rate risk of non-financial firms: who hedges and does it help?
Abstract: Natural language text analysis of 80,000 company financial statements published by 14,000 non-financial firms in the euro area, United Kingdom and United States shows that around 50% of firms with variable rate debt hedge their interest rate risk.
Firms that hedge interest rate risk tend to be larger and have smaller cash buffers and lower equity valuations.
When interest rates rise, firms that hedge their interest rate risk experience a smaller negative impact on their interest coverage ratios and market valuations. They are also better able to maintain the size of their workforce.
Our analysis highlights the importance of, and the challenges in, getting a comprehensive overview of hedging activity among non-financial firms.
Length: 8 pages
Creation-Date: 2023-12-13
File-URL: https://www.bis.org/publ/bisbull81.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/bisbull81.htm
File-Format: text/html
Number: 81
Handle: RePEc:bis:bisblt:81