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The maturity structure of corporate hedging: The case of the U.S. oil and gas industry

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  • Mnasri, Mohamed

    (HEC Montreal, Canada Research Chair in Risk Management)

  • Dionne, Georges

    (HEC Montreal, Canada Research Chair in Risk Management)

  • Gueyie, Jean-Pierre

    (Université du Québec à Montréal)

Abstract

This paper investigates how firms design the maturity of their hedging programs, and the real effects of maturity choice on firm value and risk. Using a new dataset on hedging activities of 150 U.S. oil and gas producers, we find strong evidence that hedging maturity is influenced by investment programs, market conditions, production specificities, and hedging contract features. We also give empirical evidence of a non-monotonic relationship between hedging maturity and measures of financial distress. We further investigate the motivations of early termination of contracts. Finally, we show that longer hedging maturities could attenuate the impacts of commodity price risk on firm value and risk.

Suggested Citation

  • Mnasri, Mohamed & Dionne, Georges & Gueyie, Jean-Pierre, 2013. "The maturity structure of corporate hedging: The case of the U.S. oil and gas industry," Working Papers 13-5, HEC Montreal, Canada Research Chair in Risk Management.
    • Handle: RePEc:ris:crcrmw:2013_005
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    Cited by:

    1. Dietrich Domanski & Jonathan Kearns & Marco Jacopo Lombardi & Hyun Song Shin, 2015. "Oil and debt," BIS Quarterly Review, Bank for International Settlements, March.

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    More about this item

    Keywords

    Risk management; maturity choice; early termination; economic effects; oil and gas industry;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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