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Article: Product Price Risk and Liquidity Management: Evidence from the Electricity Industry

TitleProduct Price Risk and Liquidity Management: Evidence from the Electricity Industry
Authors
Lin, CSchmid, TWeisbach, MS
Keywordselectricity price volatility
cash holdings
weather volatility
operating flexibility
hedging
Issue Date2021
PublisherINFORMS. The Journal's web site is located at http://mansci.pubs.informs.org
Citation
Management Science, 2021, v. 67 n. 4, p. v, 1993-2656, iii-iv How to Cite?
DOI: http://dx.doi.org/10.1287/mnsc.2020.3579
AbstractProduct price risk is a potentially important factor for firms’ liquidity management. A natural place to evaluate the impact of this risk on liquidity management is the electricity industry, because producing firms face substantial price volatility in wholesale markets. Empirically, higher volatility of electricity prices leads to an increase in cash holdings, and this effect is robust to instrumenting for price risk using weather volatility. Cash increases more with price risk in firms using inflexible production technologies and those that cannot easily hedge electricity prices, indicating that operating flexibility and hedging are substitutes for liquidity management.
Persistent Identifierhttp://hdl.handle.net/10722/282484
ISSN
0025-1909
2021 Impact Factor: 6.172
2020 SCImago Journal Rankings: 4.954
ISI Accession Number ID
WOS:000647192700027

 

DC FieldValueLanguage
dc.contributor.authorLin, C-
dc.contributor.authorSchmid, T-
dc.contributor.authorWeisbach, MS-
dc.date.accessioned2020-05-15T05:28:43Z-
dc.date.available2020-05-15T05:28:43Z-
dc.date.issued2021-
dc.identifier.citationManagement Science, 2021, v. 67 n. 4, p. v, 1993-2656, iii-iv-
dc.identifier.issn0025-1909-
dc.identifier.urihttp://hdl.handle.net/10722/282484-
dc.description.abstractProduct price risk is a potentially important factor for firms’ liquidity management. A natural place to evaluate the impact of this risk on liquidity management is the electricity industry, because producing firms face substantial price volatility in wholesale markets. Empirically, higher volatility of electricity prices leads to an increase in cash holdings, and this effect is robust to instrumenting for price risk using weather volatility. Cash increases more with price risk in firms using inflexible production technologies and those that cannot easily hedge electricity prices, indicating that operating flexibility and hedging are substitutes for liquidity management.-
dc.languageeng-
dc.publisherINFORMS. The Journal's web site is located at http://mansci.pubs.informs.org-
dc.relation.ispartofManagement Science-
dc.subjectelectricity price volatility-
dc.subjectcash holdings-
dc.subjectweather volatility-
dc.subjectoperating flexibility-
dc.subjecthedging-
dc.titleProduct Price Risk and Liquidity Management: Evidence from the Electricity Industry-
dc.typeArticle-
dc.identifier.emailLin, C: chenlin1@hku.hk-
dc.identifier.emailSchmid, T: schmid@hku.hk-
dc.identifier.authorityLin, C=rp01808-
dc.identifier.authoritySchmid, T=rp02028-
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1287/mnsc.2020.3579-
dc.identifier.scopuseid_2-s2.0-85105342184-
dc.identifier.hkuros309887-
dc.identifier.volume67-
dc.identifier.issue4-
dc.identifier.spagev, 1993-
dc.identifier.epage2656, iii-iv-
dc.identifier.isiWOS:000647192700027-
dc.publisher.placeUnited States-
dc.identifier.issnl0025-1909-

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