IDEAS home Printed from https://ideas.repec.org/a/oup/rfinst/v33y2020i11p5015-5050..html
   My bibliography  Save this article

Derivatives Supply and Corporate Hedging: Evidence from the Safe Harbor Reform of 2005

Author

Listed:
  • Erasmo Giambona
  • Ye Wang
  • Philip Strahan

Abstract

This article analyzes the importance of supply-side fluctuations for corporate hedging. To establish a causal link, we exploit a regulatory change that allows derivatives counterparties to circumvent the Bankruptcy Code’s automatic stay: the Safe Harbor Reform of 2005. Following the reform-induced expansion in the availability of derivatives, fuel hedging by airlines nearing financial distress (those that benefited most from the reform) significantly increased in comparison with financially sound airlines. We find that the hedging propensity similarly increased in a general sample of nonfinancial firms. In line with theory, we also find that operating performance increased for the affected firms.

Suggested Citation

  • Erasmo Giambona & Ye Wang & Philip Strahan, 2020. "Derivatives Supply and Corporate Hedging: Evidence from the Safe Harbor Reform of 2005," The Review of Financial Studies, Society for Financial Studies, vol. 33(11), pages 5015-5050.
    • Handle: RePEc:oup:rfinst:v:33:y:2020:i:11:p:5015-5050.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/rfs/hhaa015
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Calluzzo, Paul & Dudley, Evan, 2022. "Corporate hedging fragility in the over-the-counter market," Journal of Empirical Finance, Elsevier, vol. 67(C), pages 253-270.
    2. Yaghoub Abdi & Xiaoni Li & Xavier Càmara-Turull, 2023. "Firm value in the airline industry: perspectives on the impact of sustainability and Covid-19," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-24, December.

    More about this item

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:rfinst:v:33:y:2020:i:11:p:5015-5050.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/sfsssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.