Collateral requirements and corporate policy decisions

Kizkitza Biguri and Jörg R. Stahl

Journal of Financial Intermediation, 2024, vol. 60, issue C

Abstract: We challenge the theorized trade-off between risk management and investment due to collateral constraints. We compile a unique dataset of derivative transactions and collateral for U.S. public firms. Exploiting exogenous variation in cash-collateral, we observe significant effects on hedging but no impact on investment. Variations in PPE-collateral, instead, impact investment but show no association with hedging. Our findings suggest that a firm’s assets should not be seen as interchangeable; they rather play distinct roles in the collateralization process.

Keywords: Collateral; Hedging; Liquidity; Financial constraints; Investment (search for similar items in EconPapers)
JEL-codes: G01 G31 G32 G39 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:60:y:2024:i:c:s1042957324000329

DOI: 10.1016/j.jfi.2024.101104

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