An Investigation of the Hedging Behaviour and Characteristics of U.S. And EX-U.S. Airlines

Mistry, Shailen (2017) An Investigation of the Hedging Behaviour and Characteristics of U.S. And EX-U.S. Airlines. [Dissertation (University of Nottingham only)]

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This paper looks at the hedging behaviour and characteristics of U.S. airlines and EX-U.S.

airlines with the aim of making meaningful comparisons and observations between them.

This paper utilises a sample of 61 airlines (8 U.S. airlines and 53 EX-U.S. airlines) across 37

countries over a period of 14 years (2002-2015). The methodology incorporates a number of

tests which include: means difference tests, univariate logit tests and multivariate logit tests.

The results of these tests provided overpowering evidence in support of H1, that larger firms

hedge more. This is in line with theories that indicate economies of scale and transaction cost

scale economies leading to increased hedging. The results measuring financial distress costs

provide some conflicting views. For EX-U.S. airlines, interest coverage provided to be

significant and consistent with the hypothesis that the higher the expected costs of financial

distress the more likely an airline is to hedge. For U.S. airlines the results were insignificant.

When using measures of leverage, they provided significant and meaningful results in

accordance with the hypothesis for U.S. airlines but a significant and negative relationship for

EX-U.S. airlines. The fuel expense variable yields significant and meaningful results for the

U.S. sample in accordance with the hypothesis that the more exposed an airline is to fuel risk

the more likely it is to hedge its fuel risk. However, EX-U.S. airlines yield insignificant and

inconsistent views with the same hypothesis. This leads to the belief that EX-U.S. airlines

view hedging to be insignificant upon total costs. This is somewhat surprising considering

that they have higher average fuel costs as a percentage of total operating costs, as can be

seen in Figure 1.

Item Type: Dissertation (University of Nottingham only)
Depositing User: Mistry, Shailen
Date Deposited: 11 Apr 2018 08:43
Last Modified: 17 Apr 2018 15:07

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