Conclusions and Suggestions for Future Research
Overall, we find that corporate risk management literature is increasingly reliant on samples drawn from commodity users and producers. The findings of research to date show that commodity price risk can affect the returns on stocks and that commodity hedging can reduce this exposure. Results are mixed regarding whether commodity risk management adds value. Finally, various factors have been shown to affect corporate hedging policy. These factors include variables related to financing and compensation, as well as selective hedging by firm management.
Despite the fact that empirical work in corporate risk management has been published over the last 20+ years, we observe that academic understanding is still very incomplete. In particular, the academic finance profession is still far from being able to provide clear guidance as to whether Mr. Topping (“hedging is a fiduciary responsibility”) or Mr. Kirby (“hedging is a waste of time”) are more correct in their views. Thus, we believe that there are plenty of opportunities to expand our knowledge in the risk management area. Because of data limitations with respect to studying corporate risk management generally by nonfinancial companies, there should be plenty of opportunities to study risk management through the lens of commodity producers and users.
