Pearson Prizes for the Best Papers in Financial Management

Every two years, Financial Management’s Editors, Associate Editors, and Advisory Editors choose the best papers from all of the journal articles published during the past two years through a double ranking procedure. Thanks to the generous support of Pearson, the winner is awarded a cash prize of $7,500 and the runner-up paper is awarded a cash prize of $2,500.

Congratulations to the 2020 award winners! 


The Theory and Practice of Corporate Risk Management: Evidence from the Field (Winter 2018, Volume 47, Issue 4)
Erasmo Giambona, Syracuse University; John R. Graham, Duke University; Campbell R. Harvey, Duke University; Gordon M. Bodnar, John Hopkins University

We survey more than 1,100 risk managers from around the world regarding their risk management policies. We find evidence consistent with some traditional theories of risk management, but not with all. We then study “why” or “why not” firms hedge and find that almost 90% of risk managers in nonfinancial firms hedge to increase expected cash flow. We also find that 70% to 80% of risk managers hedge to smooth earnings or to satisfy shareholders’ expectations. Our analysis also suggests that regulatory changes implemented to increase market stability (e.g., Dodd‐Frank Act) could discourage corporate hedging. Finally, we provide evidence regarding hedging in six areas of risk: interest rate, foreign exchange, commodity, energy, credit, and geopolitical. We find that operational hedging is more common than financial hedging in all risk areas except foreign exchange.


Risk-Taking Channel of Monetary Policy (Fall 2019, Volume 48, Issue 3)
Tobias Adrian, International Monetary Fund; Arturo Estrella, Rensselaer Polytechnic Institute; Hyun Song Shin, Bank for International Settlements

One of the most robust stylized facts in macroeconomics is the forecasting power of the term spread for future real activity. We propose a possible causal mechanism for the forecasting power of the term spread, deriving from the balance sheet management of financial intermediaries and the “risk‐taking channel of monetary policy.” Monetary tightening leads to the flattening of the term spread, reducing net interest margin and credit supply. We provide empirical support for the risk‐taking channel.