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Porträtt av Niclas Andrén. Foto.

Niclas Andrén

Prefekt Företagsekonomiska institutionen

Porträtt av Niclas Andrén. Foto.

Risk Shifting or Risk Management: How do Firms Hedge in Financial Distress?

Författare

  • Niclas Andrén
  • Evan Dudley
  • Håkan Jankensgård

Summary, in Swedish

In this paper we address the question of how firms hedge in financial distress. Using hand-collected data from oil and gas producers, we show thatthe uniquecharacteristic of derivative portfolios in distressed firms is a strategythat involvessold put options. This is puzzling, considering that selling put options amounts to selling insurance, which creates a new liability that distressed firms seem ill equipped to take on. While suggestive of risk shifting behaviour, thedatadoes not bear this hypothesis out.Instead, the theory that fares best in our analysis emphasizes that sold put options arepart of the optimal risk management strategy in economicallydistressed firms.

Avdelning/ar

  • Redovisning och finans

Publiceringsår

2020-10-23

Språk

Engelska

Dokumenttyp

Konferensbidrag

Ämne

  • Business Administration

Nyckelord

  • Corporate hedging
  • risk shifting
  • financial distress
  • risk management
  • financial constraints
  • G30
  • G32

Conference name

Financial Management Association International: 2020 Annual Meeting

Conference date

2020-10-19 - 2020-10-23

Conference place

New York, United States

Status

Unpublished

Forskningsgrupp

  • Knut Wicksell Centre for Financial Studies