Strategic Risk Management and Product Market Competition

Tim R. Adam and Amrita Nain

Chapter 1 in Advances in Financial Risk Management, 2013, pp 3-29 from Palgrave Macmillan

Abstract: Abstract How does competition affect corporate risk management strategies? The the-oretical literature has derived conflicting predictions. Allayannis and Ihrig (2001) predict that firms operating in more competitive industries are more likely to hedge, while Mello and Ruckes (2008) predict that firms hedge less if competition is more intense. Adam, Dasgupta, and Titman (2007) show that competition can have a positive or negative impact on the number of firms that hedge in equilibrium. While the theoretical literature has produced conflicting answers, anecdotal evidence suggests that the competitive environment does affect firms’ hedging strategies. For example, Brown (2001) reports that competitive pricing concerns in the product market, rather than the traditional models of hedging, determine how a major durable goods producer in the US hedges its FX exposures.

Keywords: Output Price; Risk Management Strategy; Hedging Strategy; Competitive Industry; Foreign Sale (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (3)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-02509-8_1

Ordering information: This item can be ordered from
http://www.palgrave.com/9781137025098

DOI: 10.1057/9781137025098_1

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().