The Maturity Structure of Corporate Hedging: The Case of the U.S. Oil and Gas Industry

57 Pages Posted: 23 Oct 2013 Last revised: 18 Jan 2014

See all articles by Mohamed Mnasri

Mohamed Mnasri

University of Quebec at Montreal (UQAM)

Georges Dionne

HEC Montreal - Department of Finance

Jean-Pierre Gueyie

University of Quebec in Montreal-Department of Finance

Date Written: January 15, 2014

Abstract

This paper investigates how firms design the maturity of their hedging programs, and the real effects of maturity choice on firm value and risk. Using a new dataset on hedging activities of 150 U.S. oil and gas producers, we find strong evidence that hedging maturity is influenced by investment programs, market conditions, production specificities, and hedging contract features. We also give empirical evidence of a non-monotonic relationship between hedging maturity and measures of financial distress. We further investigate the motivations of early termination of contracts. Finally, we show that longer hedging maturities could attenuate the impacts of commodity price risk on firm value and risk.

Keywords: Risk management, maturity choice, early termination, economic effects, oil and gas industry

JEL Classification: D8, G32

Suggested Citation

Mnasri, Mohamed and Dionne, Georges and Gueyie, Jean-Pierre, The Maturity Structure of Corporate Hedging: The Case of the U.S. Oil and Gas Industry (January 15, 2014). Available at SSRN: https://ssrn.com/abstract=2343727 or http://dx.doi.org/10.2139/ssrn.2343727

Mohamed Mnasri

University of Quebec at Montreal (UQAM) ( email )

PB 8888 Station DownTown
Succursale Centre Ville
Montreal, Quebec H3C3P8
Canada

Georges Dionne (Contact Author)

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada
514-340-6596 (Phone)
514-340-5019 (Fax)

HOME PAGE: http://www.hec.ca/gestiondesrisques/

Jean-Pierre Gueyie

University of Quebec in Montreal-Department of Finance ( email )

School of Business Administration
Montreal, Quebec H3C 4R2
Canada
514-987-3000, x2358 (Phone)
514-987-0422 (Fax)

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