Which form of hedging matters — Operational or financial? Evidence from the US oil and gas sector

Elaine Laing, Brian Lucey and Tobias Lütkemeyer

Research in International Business and Finance, 2020, vol. 51, issue C

Abstract: We examine the extent and impact of operational and financial hedging on commodity price risk in US oil and gas companies. We find significant exposure to underlying commodity movements. Using a combination of hand collected and publicly available data we examine the impact of hedging strategies. We find no evidence that operational hedging, defined here as multinationality, is effective. In contrast, we find that financial hedging is significant and impactful. Sub-period analysis shows that the effectiveness of financial hedging diminishes when commodity price volatility is high.

Keywords: Hedging; Operational hedging; Financial hedging; Commodity exposure (search for similar items in EconPapers)
JEL-codes: G30 G31 Q02 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:51:y:2020:i:c:s0275531918302794

DOI: 10.1016/j.ribaf.2019.101088

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