Optimal Hedging Strategies and Interactions between Firms
This 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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|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|
|Contact details of provider:|| Web page: http://www.dauphine.fr/en/welcome.html|
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- Shleifer, Andrei & Vishny, Robert W, 1992. " Liquidation Values and Debt Capacity: A Market Equilibrium Approach," Journal of Finance, American Finance Association, vol. 47(4), pages 1343-66, September.
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