An empirical test of agency cost reduction using interest rate swaps

Joel T. Harper, John R. Wingender

Research output: Contribution to journalArticle

6 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)1419-1431
Number of pages13
JournalJournal of Banking and Finance
Volume24
Issue number9
DOIs
StatePublished - Sep 2000

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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