An empirical test of agency cost reduction using interest rate swaps

An empirical test of agency cost reduction using interest rate swaps

This paper tests a model based on Wall's (Wall, L., 1989. Journal of Banking and Finance 13, 261–270) hypothesis of agency cost reduction using interest rate swaps. We find a significant positive relationship between the risk of the firm and the reduction of agency costs measured by the continu...

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Bibliographic Details
Published in:Journal of banking & finance Vol. 24; no. 9; pp. 1419 - 1431
Main Authors: Harper, Joel T, Wingender, John R
Format: Journal Article
Language:English
Published: Amsterdam Elsevier B.V 01-09-2000
Elsevier
Elsevier Sequoia S.A
Series:Journal of Banking & Finance
Subjects:
Agency
Agency cost
Agency theory
Banking
Bonds
Capital market
Empirical study
Financial economics
Hypotheses
Interest rate swaps
Interest rates
Securities markets
Studies
Swap arrangements
Valuation
United States > US
G14
Agency cost
D80
Empirical study
Interest rate swaps
G10
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Description
Summary:This paper tests a model based on Wall's (Wall, L., 1989. Journal of Banking and Finance 13, 261–270) hypothesis of agency cost reduction using interest rate swaps. We find a significant positive relationship between the risk of the firm and the reduction of agency costs measured by the continuously compounded excess return (CAR) of the firm. Our findings are consistent with Wall’s hypothesis and other theories of swap transactions and in explaining the existence and growth of the swap market.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0378-4266
1872-6372
DOI:10.1016/S0378-4266(99)00098-9