Determinants of Corporate Hedging Decisions - The Case of Oil and Gas Industry

Student: Kriventsova Daria

Faculty: International College of Economics and Finance

Educational Programme: Double degree programme in Economics of the NRU HSE and the University of London (Bachelor)

Year of Graduation: 2017

In this paper, we investigate what drives corporate hedging practices, in particular, what determines the intensity of hedging. The majority of previous studies on the topic investigate this question by simply separating companies into hedgers and non-hedgers, however, paying little attention to the magnitude of hedging due to data constraints. We use a sample of 48 oil and gas exploration and production companies from the USA, and find evidence that managerial risk aversion and costs of financial distress motives affect the magnitude of hedging, and that smaller sized firms tend to deploy more intense hedging (which, however, could also be justified through theories of financial distress costs).

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