The Motivation for Hedging Revisited

J.M.E. Pennings, R.M. Leuthold

Research output: Contribution to journalArticleAcademicpeer-review

14 Citations (Scopus)


This article develops an alternative view on the motivation to hedge. A conceptual model shows how hedging facilitates contract relationships between firms and can solve conflicts between firms. In this model, the contract preferences, level of power, and conflicts in contractual relationships of firms are driving the usage of futures contracts. The model shows how using futures markets can provide a jointly preferred contracting arrangement, enhancing relationships between firms. The robust nature of the conceptual model is empirically examined through a computer-guided study of various firms. (C) 2000 John Wiley & Sons, Inc.
Original languageEnglish
Pages (from-to)865-885
JournalJournal of Futures Markets
Issue number9
Publication statusPublished - 2000


  • futures markets
  • developing-country
  • shareholder value
  • channel
  • power
  • prices
  • uncertainty
  • dependence
  • conflict
  • firm

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