Determinants of Hedging Maturity: An Empirical Study in American Oil and Gas Companies

Abstract: This study analyzes hedging maturity structure and examines the relation between the maturity structure of corporate hedging and debt characteristics. The purpose of the study is to provide new insights in what determines the hedging maturity and discover new aspects of companies hedging positions, which still is an unexplored area of modern risk management theory. The objective of the paper is to look into possible variables that may explain maturity of financial instruments used in hedging and if the theory behind debt maturity is relevant and applicable in determining the maturity of hedging positions. A dataset containing quarterly information about a pool of American oil and gas companies hedging behavior and their financial performance between the years of 2012 and 2016 were used. In addition, financial ratios previously determined to be significant for hedge ratio were added. Overall, our findings indicate there is no evidence for a relationship between long-term debt and hedging maturity.