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

• 成果类型: Article
• 署名作者: Giambona, Erasmo; Wang, Ye
• 署名单位: Syracuse University; University of International Business & Economics
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhaa015
• 发表日期: 2020
• 页码: 5015
• 关键词: product-market competition; AFFECT FIRM VALUE; RISK-MANAGEMENT; Financial distress; INVESTMENT; determinants; incentives; liquidity; default; CHOICE

摘要

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.