Corporate issues of foreign currency exchange warrants. A case study of financial innovation and risk management

Richard J. Rogalski, James K. Seward

Research output: Contribution to journalArticle

5 Scopus citations

Abstract

We argue that hedging and risk management activities of modern corporations arise as a direct consequence of attempts to create shareholder wealth through financial innovation. We formalize this argument by examining in detail corporate issues of foreign currency exchange warrants. We then focus on one multiple issuer to demonstrate how the foreign exchange risk created by the sale of the warrants can be eliminated. The use of off-balance-sheet risk management techniques to lock in the benefits of selling overpriced securities raises questions about the information content of innovative corporate financing decisions.

Original languageEnglish (US)
Pages (from-to)347-366
Number of pages20
JournalJournal of Financial Economics
Volume30
Issue number2
DOIs
StatePublished - Dec 1991

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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