In this paper we bring new empirical evidence that political uncertainty is associated with higher corporate debt financing costs. Controlling for all bond and firm characteristics that could affect a firm's cost of debt financing, the uncertainty associated with the outcome of U.S. presidential elections leads to a 34 basis point increase in corporate bond spreads, with closer campaign years associated with additional costs. Similar results hold when we use the continuous measure of the Political Uncertainty Index by Baker et al. (2012). The uncertainty associated with gubernatorial elections, on the other hand, has no effect on the pricing of corporate bonds.

The paper develops a network-based framework to assess the impact of a firm's financial interconnections and interdependencies on it optimal hedging and risk transfer strategy. This is important consideration as risk concentrations and propagation embedded in risk transfers pose as a significant challenge for financial regulations and risk management. Using an a priori and an a posteriori analysis, we investigate the impact of the network structure on optimal hedge decisions and hedge efficacy. The a priori analysis shows that network features play an important role in determining corporate hedging decisions through their impact on hedge costs. In the a posteriori analysis for counterparty risk, benefit of modification from the a priori optimal hedge decision is realized when variance of firm value matters, but not when tail risk measures are utilized. Financial network assessment indicates that an a priori analysis is insufficient for robust hedging decisions, and choice of risk measures behind risk management objectives dictates the extent of impact of network characteristics.