Optimal Hedging Strategies and Interactions between Firms
AbstractThis paper studies corporate risk management in a context of financial constraints and imperfect competition in the product market. The paper shows that interactions between firms affect their hedging strategies. As a general rule, firms' hedging demands decrease with the correlation between their internal funds and investment opportunities. Moreover, when a firm's hedging demand is high in the case where investments are strategic substitutes, its hedging demand is low in the case where investments are strategic complements and vice versa.
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Bibliographic InfoPaper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/12110.
Date of creation: Mar 2012
Date of revision:
Publication status: Published in Journal of Economics and Management Strategy, 2012, Vol. 21, no. 1. pp. 79-129.Length: 50 pages
Firm; Firms; Imperfect Competition; Investment;
Other versions of this item:
- Frederic Loss, 2012. "Optimal Hedging Strategies and Interactions between Firms," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 21(1), pages 79-129, 03.
- Frederic Loss, 2002. "Optimal Hedging Strategies and Interactions between Firms," FMG Discussion Papers dp399, Financial Markets Group.
- Frederic Loss, 2002. "Optimal hedging strategies and interactions between firms," LSE Research Online Documents on Economics 24903, London School of Economics and Political Science, LSE Library.
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
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"On the strategic value of risk management,"
TSE Working Papers
12-332, Toulouse School of Economics (TSE).
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