Cash Hedging in a Supply Chain

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

3 Scopus Citations
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Author(s)

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Detail(s)

Original languageEnglish
Pages (from-to)3928-3947
Journal / PublicationManagement Science
Volume65
Issue number8
Online published14 Sep 2018
Publication statusPublished - Aug 2019

Abstract

We study hedging cash-flow risks in a supply chain where firms invest internal funds to improve production efficiencies.We offer a decomposition framework to capture the cost-reduction and flexibility effect of hedging. It allows us to understand how a firm's hedging choice depends on its supply chain partner's decision, and how such interaction is affected by supply chain characteristics such as market size, cash-flow volatility, and correlation. When firms' cash flows are independent of each other, they are more likely to hedge with a larger market size. When cash flows are correlated, the impact of market size and volatility on firms' hedging decisions presents multiple patterns, contingent on whether their risks amplify or offset each other.

Research Area(s)

  • Flexibility, Hedging, Risk management, Supply chain

Bibliographic Note

Information for this record is supplemented by the author(s) concerned.

Citation Format(s)

Cash Hedging in a Supply Chain. / Kouvelis, Panos; Wu, Xiaole; Xiao, Yixuan.

In: Management Science, Vol. 65, No. 8, 08.2019, p. 3928-3947.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review