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Does Risk Management Matter? Evidence from the U.S. Agricultural Industry

56 Pages Posted: 10 Dec 2008 Last revised: 23 Sep 2014

Jess Cornaggia

Pennsylvania State University - Department of Finance

Date Written: July 15, 2012

Abstract

This article constructs triple-difference tests around shifts in the supply of risk management instruments available to agricultural producers to reveal a positive relation between risk management and productivity. This relation is more robust when producers adopt instruments with payoffs linked to group performance and weaker when payoffs are linked to individual performance. Additionally, productivity is particularly high among risk-managing producers in counties containing high levels of bank deposits, a proxy for access to finance. Overall, this article illuminates the relation between hedging and real firm outcomes as well as the interaction between access to finance and firms’ risk management choices.

Keywords: risk management, hedging, productivity, firm value, access to finance, risk

JEL Classification: G220, G320, G210, Q140

Suggested Citation

Cornaggia, Jess, Does Risk Management Matter? Evidence from the U.S. Agricultural Industry (July 15, 2012). Journal of Financial Economics (JFE), 109 (2) 419-440, 2013. Available at SSRN: https://ssrn.com/abstract=1314439 or http://dx.doi.org/10.2139/ssrn.1314439

Jess Cornaggia (Contact Author)

Pennsylvania State University - Department of Finance ( email )

University Park, PA 16802
United States

HOME PAGE: http://jesscornaggia.com

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