Hedging and Competition / Erasmo Giambona, Anil Kumar, Gordon M. Phillips.

Format:

Book

Author/Creator:

Giambona, Erasmo.

Contributor:

National Bureau of Economic Research.

Kumar, Anil.

Phillips, Gordon M.

Series:

Working Paper Series (National Bureau of Economic Research) no. w29207.

NBER working paper series no. w29207

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2021.

Summary:

We study how risk management through hedging impacts firms and competition among firms in the life insurance industry - an industry with over 7 Trillion in assets and over 1,000 private and public firms. We show that firms that are likely to face costly external finance increase hedging after staggered state-level financial reform that reduces the costs of hedging. Post reform impacted firms have lower risk and fewer negative income shocks. Product market competition is also impacted. Firms that previously are more likely to face costly external finance, lower price, increase policy sales and increase their market share post reform. The results are consistent with hedging allowing firms that face potential costly financial distress to decrease risk and become more competitive.

Notes:

Print version record

September 2021.