Collateral requirements and corporate policy decisions

Kizkitza Biguri*, Jorg R. Stahl

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

We challenge the theorized trade-off between risk management and investment due to collateral constraints. We compile a unique dataset of derivative transactions and collateral for U.S. public firms. Exploiting exogenous variation in cash-collateral, we observe significant effects on hedging but no impact on investment. Variations in PPE-collateral, instead, impact investment but show no association with hedging. Our findings suggest that a firm’s assets should not be seen as interchangeable; they rather play distinct roles in the collateralization process.
Original languageEnglish
Article number101104
Number of pages13
JournalJournal of Financial Intermediation
Volume60
DOIs
Publication statusPublished - Oct 2024

Keywords

  • Collateral
  • Financial constraints
  • Hedging
  • Investment
  • Liquidity

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