Why do firms (not) hedge? — Novel evidence on cultural influence

Martin Lievenbrück and Thomas Schmid

Journal of Corporate Finance, 2014, vol. 25, issue C, 92-106

Abstract: We examine whether cultural differences between countries help in explaining firms' hedging decisions. For this, we manually collect data on the hedging behavior of worldwide energy utilities. The analysis reveals a strong impact of a country's long-term orientation, which reduces the probability for hedging and the hedged volume. The only other factor with a consistently higher economic impact is firm size. Furthermore, hedging with options is less common in countries with a high level of masculinity. Overall, the results reveal that culture has a strong impact on the hedging behavior of firms. This influence is not captured by other country-specific factors such as economic development or the legal framework.

Keywords: Hedging; Derivatives; Risk management; Culture; Energy utilities (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (34)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:25:y:2014:i:c:p:92-106

DOI: 10.1016/j.jcorpfin.2013.10.010

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