Vertical integration as an input price hedge: The case of Delta Air Lines and trainer refinery

Almansur, Abdullah Mohammed; Megginson, William L.; Pugachev, Leonid

doi:10.1111/fima.12260

Cited by 4 publications

(2 citation statements)

References 74 publications

(123 reference statements)

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“…However, financial hedging contributes less to firms than marketing strategy. It is consistent with empirical observations that financial hedging only fine-tunes firm performance, compared with operational hedging (Almansur et al, 2020;Jin & Jorion, 2006;Treanor et al, 2014). Nevertheless, hedged firms have a higher Tobin's Q than diversified firms.…”

Section: Relative Value Contributions Of Hedging Instrumentssupporting

confidence: 89%

Optimal hedging in the presence of internal flexibility

Jiang

Feng

2022

Int. J Fin Econ

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Internal flexibility aids in risk management and has a broader application than hedging instruments. This paper demonstrates how optimal hedging policies are affected by it. We develop a dynamic risk management model to capture financial and operational decisions. We first show that internal flexibility reduces the marginal value of hedging instruments. As a result, optimal financial hedging is selective and dependent on investment opportunities. These opportunities account for the majority of the difference between hedged and unhedged firms. By incorporating internal flexibility, the model becomes more realistic but also generates a complex interaction between financial hedging and marketing strategy. During the growth phase, hedging instruments are partially substitutive but have a synergistic effect on investment. In the mature or declining phase, the remedial effect of marketing strategy maintains investment, thereby increasing operating risk and the marginal value of financial hedging. These results are applicable to firms free of agency conflicts and provide a solid theoretical basis for future empirical tests. We advise that scholars thoroughly examine internal flexibility and development stages in the process.

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Section: Relative Value Contributions Of Hedging Instrumentssupporting

confidence: 89%

Optimal hedging in the presence of internal flexibility

Jiang

Feng

2022

Int. J Fin Econ

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“…For example, an organization that has to pay for oil, like an airline, would buy shares of an oil-producing company. In some very specific cases, this might prove effective in overcoming the imperfect supply of long-term hedging against oil prices (Manuela Jr., Rhoades, and Curtis, 2016;Almansur, Megginson, and Pugachev, 2020). An immediate recommendation for such a tool is not clear, neither should this option be completely dismissed for all scenarios.…”

Section: Hedging Weather and Climate Exposurementioning

confidence: 99%

Smoldering Embers: Do State-Owned Enterprises Threaten Fiscal Stability in the Caribbean?

Reyes-Tagle¹,

Hosein²,

Musacchio³

et al. 2022

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This book examines the role of state-owned enterprises (SOEs) in contributing to the fiscal instability of the Bahamas, Barbados, Guyana, Jamaica, Suriname, and Trinidad and Tobago (CCB6), with the aim of providing tangible guidance for policymakers seeking to address this issue. Using an original dataset of SOE performance in the Caribbean, the contributors focus on the fiscal implications of unchecked growth, poor oversight, and mismanagement of SOEs, with particular focus on commercial SOEs. The authors examine the historical, economic, and socio-political context of SOEs in the CCB6 and stress the need for simultaneous fiscal reform both at the federal and firm levels. The authors analyze the SOE sectors growth and performance to date, revealing entrenched challenges, specifically around incentives and accountability. The recommendations propose adaptations of accepted international best practices and lay out long-term objectives and the more feasible points of entry for fiscal reform.

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Firm Boundaries in Energy Markets: Should Heavy Users of Energy Vertically Integrate into Production?

Mackey

Mousavian

2023

Curr Sustainable Renewable Energy Rep

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Vertical integration as an input price hedge: The case of Delta Air Lines and trainer refinery

Cited by 4 publications

References 74 publications

Optimal hedging in the presence of internal flexibility

Optimal hedging in the presence of internal flexibility

Smoldering Embers: Do State-Owned Enterprises Threaten Fiscal Stability in the Caribbean?

Firm Boundaries in Energy Markets: Should Heavy Users of Energy Vertically Integrate into Production?

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