We study how risk management through hedging impacts firms and competition among firms in the life insurance industry … hedging. Post reform impacted firms have lower risk and fewer negative income shocks. Product market competition is also … face costly external finance increase hedging after staggered state-level financial reform that reduces the costs of …

We use a dynamic model of cash management in which firms face competitive pressure to show that competition increases … competition has first order effects on the cash holdings and financing decisions of constrained firms, in ways consistent with our … theory …

sensitivities are particularly intense for unconstrained firms with high hedging needs. Investment opportunities (as proxied by Q …), however, play a larger role for constrained firms with the effects being strongest in case of low hedging needs. Interestingly …, constrained firms with low hedging needs are found to employ more debt to finance their investment opportunities and build up …