文档介绍：Hedging or Market Timing? Selecting the Interest Rate
Exposure of Corporate Debt
MICHAEL FAULKENDER*
ABSTRACT
This paper examines whether firms are hedging or timing the market when selecting the interest
rate exposure of their new debt issuances. I use a more accurate measure of the interest rate
exposure chosen by firms bining the initial exposure of newly issued debt securities with
their use of interest rate swaps. The results indicate that the final interest rate exposure is largely
driven by the slope of the yield curve at the time the debt is issued. These results suggest that
interest rate risk management practices are primarily driven by speculation or myopia, not
hedging considerations.
* Olin School of Business, Washington University in St. Louis. This paper was previously entitled “Fixed versus
Floating: Corporate Debt and Interest Rate Risk Management.” I would like to thank Greg Brown, Kent Daniel,
Michael Fishman, Thomas Hazlett, Ravi Jagannathan, Elizabeth Keating, Todd Milbourn, Todd Pulvino, Rick
Green, Stephen Sapp, an anonymous referee, and seminar participants at Northwestern University, Rice University,
the University of Oklahoma, the University of Miami, the University of Michigan, the University of Minnesota, the
University of Virginia, Washington University in St. Louis, and the Western Finance Association Annual
Conference for their valuable feedback. I also thank Marc Katz at Bank of America Securities for his helpful
discussions, John Cochrane for generously providing data, and Eric Hovey for providing research assistance. I am
especially indebted to Mitchell Petersen for his ongoing guidance. All errors are mine.
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When firms select the interest rate exposure of their liabilities and use derivatives to alter that
exposure, are they hedging or timing the market? The empirical literature has attempted to
estimate the sources of value creation stemming from hedging by examining