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The propensity to hedge using futures contracts: the case of potato futures contracts

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  • Patricia Chelley-Steeley
  • Claire Lavers

Abstract

This paper studies why UK non-financial firms hedge with potato futures contracts. It is found that the financial characteristics of firms in the sample play an important role in influencing the propensity to hedge. For example, it is found that firms that hedge are on average larger than firms that do not hedge. Firms that hedge also have more volatile earnings. Furthermore, firms that do hedge appear to want to smooth earnings to reduce the costs of financial distress and avoid entering the highest tax threshold.

Suggested Citation

  • Patricia Chelley-Steeley & Claire Lavers, 2005. "The propensity to hedge using futures contracts: the case of potato futures contracts," Applied Economics, Taylor & Francis Journals, vol. 37(18), pages 2143-2146.
    • Handle: RePEc:taf:applec:v:37:y:2005:i:18:p:2143-2146
    DOI: 10.1080/00036840500278152
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    References listed on IDEAS

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