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Risk Management with Supply Contracts / Heitor Almeida, Kristine Watson Hankins, Ryan Williams.
- Format:
- Book
- Author/Creator:
- Almeida, Heitor.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w23331.
- NBER working paper series no. w23331
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2017.
- Summary:
- Purchase obligations are forward contracts with suppliers and are used more broadly than traded commodity derivatives. This paper is the first to document that these contracts are a risk management tool and have a material impact on corporate hedging activity. Firms that expand their risk management options following the introduction of steel futures contracts substitute financial hedging for purchase obligations. Contracting frictions - such as bargaining power and settlement risk - as well as potential hold-up issues associated with relationship-specific investment affects the use of purchase obligations in the cross-section as well as how firms respond to the introduction of steel futures.
- Notes:
- Print version record
- April 2017.
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