Hedging and investment trade-offs in the U.S. oil industry

Fabrizio Ferriani and Giovanni Veronese

Energy Economics, 2022, vol. 106, issue C

Abstract: Using more than a decade of firm-level data on U.S. crude oil producers’ hedging portfolios, we document for the first time a strong positive link between a firms’ net worth and hedging. When subject to collateral constraints, firms face a trade-off between hedging and investment financing as both activities absorb collateral. Pledgeable collateral also impinges the extensive margin of risk management and we find a more limited use of linear derivative contracts when firms’ net worth increases.

Keywords: Dynamic risk management; Hedging; Net worth; Oil price collapse; Investment (search for similar items in EconPapers)
JEL-codes: D22 G00 G32 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:106:y:2022:i:c:s0140988321005843

DOI: 10.1016/j.eneco.2021.105736

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