The Impact of Commodity Price Risk on Firm Value -- An Empirical Analysis of Corporate Commodity Price Exposures

27 Pages Posted: 1 Jul 2015

See all articles by Söhnke M. Bartram

Söhnke M. Bartram

Warwick Business School - Department of Finance; Centre for Economic Policy Research (CEPR)

Date Written: June 30, 2015

Abstract

Commodity prices are more volatile than exchange rates and interest rates. Hence, a priori, commodity price risk represents a more important source of risk to corporations. This paper presents a comprehensive analysis of the economic commodity price exposure of a large sample of nonfinancial firms. The results indicate that corporations exhibit net exposures with regard to several commodity prices. Even though commodity prices are highly volatile, commodity price risk is, however, not found to be of greater importance than other financial risks. The results are consistent with few cash flows being affected by commodity price movements, and with corporate hedging of commodity price risk.

Keywords: capital markets, commodity prices, corporate finance, derivatives, exposure, risk management

JEL Classification: G3, F4, F3

Suggested Citation

Bartram, Söhnke M., The Impact of Commodity Price Risk on Firm Value -- An Empirical Analysis of Corporate Commodity Price Exposures (June 30, 2015). Multinational Finance Journal, Vol. 9, No. 3/4, p. 161-187, 2005. Available at SSRN: https://ssrn.com/abstract=2625064

Söhnke M. Bartram (Contact Author)

Warwick Business School - Department of Finance ( email )

Coventry, CV4 7AL
United Kingdom
+44 (24) 7657 4168 (Phone)
+1 425 952 1070 (Fax)

HOME PAGE: http://go.warwick.ac.uk/sbartram/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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