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Dynamic Corporate Risk Management: Motivations and Real Implications

Georges Dionne (georges.dionne@hec.ca), Jean-Pierre Gueyie (gueyie.jean-pierre@uqam.ca) and Mohamed Mnasri (mohamed.mnasri@hec.ca)
Additional contact information
Jean-Pierre Gueyie: HEC Montreal, Canada Research Chair in Risk Management, Postal: Department of Finance, University of Quebec in Montreal, C.P.8888, succ. Centre-ville, Montreal (Qc) Canada, H3C 3P8
Mohamed Mnasri: HEC Montreal, Canada Research Chair in Risk Management, Postal: 3000, Chemin Cote-Ste-Catherine, room 4.454, Montreal (Qc) Canada, H3T 2A7

No 16-2, Working Papers from HEC Montreal, Canada Research Chair in Risk Management

Abstract: We investigate the dynamics of corporate hedging programs by US oil producers and examine the effects of hedging maturity choice on firm value. We find evidence of a concave relation between hedging maturity and the likelihood of financial distress and oil spot prices. We further investigate the motivations of the early termination of outstanding hedging contracts. We evaluate the causal effects of hedging and show that hedging maturity increases firm value. Using the essential heterogeneity approach, we find that firms value is more strongly related to short-term hedging maturities. This is the first time this approach is applied in corporate finance.

Keywords: Hedging maturity; early termination of contracts; firm value; heterogeneous treatment effects; essential heterogeneity models; oil industry (search for similar items in EconPapers)
JEL-codes: D80 G32 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2016-07-06, Revised 2018-08-08
New Economics Papers: this item is included in nep-bec, nep-cta and nep-rmg
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Citations: View citations in EconPapers (6)

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Journal Article: Dynamic corporate risk management: Motivations and real implications (2018) Downloads
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