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Contribution Details
| Type | Journal Article |
| Scope | Discipline-based scholarship |
| Title | Liquidity management and corporate demand for hedging and insurance |
| Organization Unit | |
| Authors |
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| Item Subtype | Original Work |
| Refereed | Yes |
| Status | Published in final form |
| Language |
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| Journal Title | Journal of Financial Intermediation |
| Publisher | Elsevier |
| Geographical Reach | international |
| ISSN | 1042-9573 |
| Volume | 20 |
| Number | 3 |
| Page Range | 303 - 323 |
| Date | 2011 |
| Abstract Text | We analyze the demand for hedging and insurance by a firm facingcash-flow risks. We study how the firm’s liquidity managementpolicy interacts with two types of risk: a Brownian risk that canbe hedged through a financial derivative, and a Poisson risk thatcan be insured by an insurance contract. We find that the patternsof insurance and hedging decisions are pole apart: cash-poor firmsshould hedge but not insure, whereas the opposite is true for cashrichfirms. We also find non-monotonic effects of profitability. Thismay explain the mixed findings of empirical studies on corporatedemand for hedging and insurance. |
| Digital Object Identifier | 10.1016/j.jfi.2010.11.001 |
| Other Identification Number | merlin-id:6039 |
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