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Corporate risk management: evidence from product liability

Beatty, Anne, Gron, Anne and Jorgensen, Bjorn N. (2005) Corporate risk management: evidence from product liability. Journal of Financial Intermediation, 14 (2). pp. 152-178. ISSN 1042-9573

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Identification Number: 10.1016/j.jfi.2004.04.001


In this paper we examine the factors that determine how firms manage large, firm-specific risks, in this case, product liability. The risk of being sued for defective products or damage from defective products poses a small probability of a great loss to the firm. Product liability exposure arises from the firm's choice of products and markets; choices that are fundamental to the firm's business strategy and that are costly to alter. Firms are unlikely to be naturally hedged by cash flows with respect to product liability risk. Cash flows will likely be negatively correlated with product liability claims since product liability claims reduce product demand and increase costs through legal expenses and claims payments.

Item Type: Article
Official URL:
Additional Information: © 2013 Elsevier B.V.
Divisions: Accounting
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
Date Deposited: 07 Aug 2013 13:25
Last Modified: 04 Jan 2024 06:27

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