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ntensity of Competition in the Industry: I capture the level of competition through the level of concentration within the industry. Similar to the relationship to the number of firms, we should expect that the level of hedging increases with the level of intensity of competition, according to Allayannis and Ihrig (2001) and Adam, Dasgupta, and Titman (2007). However, if
1Adam, Dasgupta, and Titman (2007) assume that each firm in the model decide to hedge fully or does not hedge at all.
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the competition is intense, firms tend to hedge less, according to Mello and Ruckes (2008) and Adam and Nain (2013). Therefore, it is interesting to see the relationship between hedging and competition intensity. To capture the level of concentration in the industry, I use the method developed by Montgomery (1985) and followed by Liebenberg and Sommer (2008) to capture the industry concentration. First, I calculate the Herfindahl index for each line of business using the relationship,
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