The Economics of Financial and Operational Hedging: Insights from US Power Plants
28 Nov 2023
13:00 -14:15
Times are shown in local time.
Open to: All
Castle Teaching Room (Cambridge Judge Business School)
Trumpington St
Cambridge
CB2 1AG
United Kingdom
Join our Finance seminar
Speaker: Dr Dong Yan, Rotterdam School of Management
About the seminar
We study firms’ hedging policies using US electric utilities as a laboratory for our theoretical and empirical analysis. Our parsimonious model of risk management highlights a tension between financial and operational hedging.
The former reallocates risk to specialised investors, which lowers the firm’s cost of financing but also decreases the firm’s subsequent incentives to reduce risk by undertaking the latter. We provide evidence consistent with the model’s predictions. In particular, we document a financial hedge overhang: firms that hedge via financial contracts subsequently engage in less operational hedging, for example storing gas inventory.
Speaker bio
Dong Yan is an Associate Professor of Finance at Rotterdam School of Management, Erasmus University, a research fellow of the Swedish House of Finance (SHoF), and a research affiliate of Centre for Economic Policy Research (CEPR). She obtained her PhD in Finance from HKUST Business School. Before joining RSM, she was an Assistant Professor of Finance at the Stockholm School of Economics.
Dong Yan’s research interests include corporate investment, the real effects of financial markets, private firms, internal capital markets, and M&A. She has written papers examining the influence of financial constraints on corporate production and inventory investment, the impact of the stock market on private firms through learning, and the role of callable bonds in mitigating debt overhang. Her work has been published in leading journals, such as the Review of Financial Studies and the Review of Finance.
Register
No registration required. If you have any questions about this seminar, please email Eleanor Stefiuk.