Abstract
Undoubtedly financial risk management due to its high impact on stockholders wealth is always considering by Banks. Risk management methods and its accomplishment leads to shareholder consent or dissatisfaction. Present research, examine this issue by three instruments of Financial risk management includes interest rate risk, capital risk and risk of natural hedging. Thus, the main problem in this content is to some extent financial risk management methods can effect on stockholders’ wealth. We separate banks into private sector and public sector and examine hypothesis for each group by regression models. Return on Equity (ROE) changes is a reliable criterion for shareholders wealth. Results show that public banks are more successful in using risk management tools in compared with private banks. In other word, we have found more meaningful relationship between financial risk management tools and shareholder wealth in public banks.
Highlights
Financial Risk may cause different form of losses to an entity through unexpected fluctuations in income cash flow and capital changes
On the other hand the governments help them by applying proper financial legislation and facilitate fiscal and monetary policies
Since the beginning of Iranian banks establishment less than hundred year ago, all of them owned by governments
Summary
Financial Risk may cause different form of losses to an entity through unexpected fluctuations in income cash flow and capital changes. We should consider financial markets structure in each economy (Durnbusch, 2004). It should be noted financial markets such as Banks, financial intermediaries and stock exchange markets can play important role in world’s financial ravages. Many financial researchers believe that financial risk must be managed and its elimination is not logical method (Saunders & Cornett, 2006; Dubofsky, 1992; Das, 2006). Risk management in each economy is a controversial issue (Sander, 2006), but risk management can be different in each business environment with its characteristics. Financial risks in an enterprise should be evaluated by different tools and management can
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