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Large-scale farm management in China has developed rapidly in recent years. Large-scale farmers face substantial operating risks, requiring extensive price risk management. However, the agricultural insurance and futures markets in China are incomplete. This study aims to analyze the price-risk-management behaviors of large-scale farmers under incomplete market conditions, with a focus on the interconnections between large scale farmers' subjective preferences (risk preferences, time preferences), liquidity constraints and their price risk management.

The authors construct an analysis framework to reveal the impact of large-scale farmers' risk preferences, time preferences and liquidity conditions on their price-risk-management behaviors under incomplete market conditions. Using data from field surveys and subjective preference experiments involving 409 large-scale grain farmers in China, an empirical analysis was conducted using the bivariate probit model.

The results show that risk-averse farmers will use risk transfer (such as contract farming) and risk diversification (such as multi-period sales) to avoid price risk. However, farmers subject to liquidity constraints and strong time preferences will not choose risk diversification, and the interaction between time preferences and liquidity constraints will strengthen this decision. The larger the farm-management scale, the greater the impact.

The authors focus on rapidly developed large-scale farm management in China. Appropriate price risk management is required by large-scale farmers due to their substantial operating risks. Considering the incomplete conditions of agricultural insurance and futures markets, the results of this study will help identify behavioral characteristics of large-scale farmers and optimize their price-risk-management strategies, further stabilizing large-scale farm management.

The purpose of this paper is to identify the relationships between grain farm and farmer profiles and their respective choices to use forward pricing techniques and revenue protection crop insurance to manage risk.

An e-mail survey of Midwestern grain farmers elicited farmer demographic information, farm profile, risk attitudes and farmer use of forward pricing and revenue protection insurance. Responses regarding use of risk management tools were compiled as choices to use possible bundles of tools to account for simultaneous nature of the decision. Choices to use bundles of tools were used as the independent variable categories in a multinomial logit regression. Regressors were relevant data collected from the survey.

Farm size, using a market advisory service, and being a technology adopter are the most important factors in predicting risk management tool use by grain farmers. Farmers tend to use forward pricing and revenue protection insurance in combination. Large farms are more likely to use forward pricing tools.

Results provide researchers, extension professionals and risk management specialists with a current understanding of how farm and farmer characteristics relate to use of risk management tools. The authors also elaborate on findings to provide guidance for future risk management research.

The survey covered 9 Midwestern states and 648 grain farmers. The survey results update understanding of grain farmers’ risk management practices. The empirical approach treats risk management decisions to use available tools as simultaneous, which recent literature suggests is more appropriate than earlier approaches.

The purpose of this paper is both to provide an overview of existing knowledge pertaining to the management of price risks in manufacturing companies from an operations management (OM) perspective and to establish an agenda for future research. Risks related to the purchase prices of industrial consumption factors (raw materials, semi-finished/finished goods, auxiliary materials and operating materials) exert an increasing influence on manufacturing companies’ business continuity and economic sustainability.

A systematic literature review was conducted following the literature search approach of vom Brocke et al. (2009). In total, 138 relevant articles were identified, analysed and synthesised.

The literature review reveals that the existing OM literature devotes little attention to price risks and their management in manufacturing companies. In particular, further empirical investigation is required to support decision-making in various risk contexts.

This paper emphasises that in addition to existing national resource funds and inter-company alliances, alternative concepts are required to secure both stable prices and access to natural resources. Otherwise, in the future, small- and medium-sized companies, along with companies based in countries lacking available resource funds, will not have an opportunity to engage in fair competition.

To the best of the authors’ knowledge, this is the first literature review to focus on price as a specific supply risk.

Firms can choose from an array of approaches for reducing the detrimental financial effects caused by unfavorable fluctuations in commodity prices. The purpose of this paper is to provide guidance for effectively estimating the financial effects of mitigating commodity price risk volatility (CPV) in supply chain management decisions.

This paper adopts two prominent and complementary methodologies, namely, total cost of ownership (TCO and real options valuation (ROV), to illustrate how commodity price risk mitigation strategies can be analyzed with respect to their effect on costs and performance. The paper provides insights through a case study to demonstrate the application of these methods together and establish the benefits and challenges associated with their implementation.

The paper illustrates advantages and disadvantages of TCO and ROV and how these approaches can be adopted together to contribute to effective purchasing decisions. Supply chain flexibility is a key capability but requires investments. Holistically measuring the financial effects of flexibility investments is imperative for gaining executive management support in mitigating commodity price volatility.

This study can provide supply chain professionals with useful guidance for measuring the costs and benefits related to developing strategies for mitigating commodity price volatility. TCO provides a focus on the costs associated with the commodity purchasing process, and ROV enables the aggregation of all the costs and benefits associated with the use of the strategy and synthesizes them into the net value estimate.

The paper provides a comparison of different but complementary approaches, specifically TCO and ROV, for analyzing the effectiveness of CPV risk mitigation decisions. In addition, these two methods allow supply chain professionals to evaluate and control the financial effects of CPV risk, particularly the impact of mitigation on firm’s cash flows.

This paper aims to investigate the impact of executives’ self-interested behaviors induced by the pay bandwagon on stock price crash risk in Chinese listed firms and attempt to shed light on the influencing channels of this effect.

The empirical analysis is based on the panel data set which contains information on the executives and stock price of 11,710 firm-year observations over the period 2007–2015. The multiple linear regression models are implemented to examine whether the executive pay bandwagon affects corporate future stock price crash risk. Then, earnings management, tax avoidance and overinvestment are applied as the behavior choice of executive pay bandwagon to analyze the potential influencing channels.

Results indicate that the lower the executives’ pay is than the median pay level of executives in firms of similar size and industry, incentives of pay bandwagon are stronger, leading to a higher future stock price crash risk. Moreover, evidence shows that the positive relationship between executive pay bandwagon and crash risk is attenuated when firms have strong external monitoring mechanisms such as Big Four auditors, cross-listing in the Hong Kong stock exchange, high marketization process and high institutional ownership. Then, some weak evidence supports that internal governance such as internal control plays the same moderating role. In addition, based on the path test, the stock price crash effect of the executive pay bandwagon has a complete tax avoidance intermediary effect and a partial earnings management intermediary effect.

This study contributes to the executive compensation literature from a psychological perspective on the economic consequences research brought about by the pay bandwagon for China’s listed firms. Moreover, this paper provides a supplement to the literature on factors which is completely different from previous studies that affect the future stock price crash risk.

Due to the low crop insurance participation by grain growers in the Pacific Northwest, the performance of insurance programs and the futures market is assessed in this area. Revenue insurance, combined with the futures and government programs, is identified as the optimal risk management portfolio. Although yield risk level, decision maker’s risk preference, and actuarial fairness of premiums can all affect farmers’ choices, the current subsidy policy is most influential. The varying subsidy levels induce farmers’ subsidy‐seeking incentive and suppress the risk‐reducing incentive. There is little diversification effect from growing two crops in the rotation instead of one.

In this article, the authors aim to describe an approach used in a purchasing/supply management course at their university that provides students with a realistic, problem‐based learning experience with client involvement while maintaining consistent learning outcomes and a manageable faculty workload term after term. Students use a standardized approach to assess commodity price risk and decide upon an effective risk management strategy. The specific commodity that students analyze is selected by client companies who then actively participate in the course.

An illustrative case is presented describing how universities can partner with companies to integrate student projects into the curriculum using a standardized, repeatable process.

There are numerous benefits obtained for students, faculty, universities, and companies when engaging in commodity price analysis and risk management projects. These include the applied learning for students, providing new insights to companies, networking opportunities for students and companies that may lead to hiring, fostering closer relationships between universities and companies, providing research contacts and opportunities, and ensuring that the course is repeatable each semester.

The authors' approach capitalizes on the realism of client involvement while reducing the variation in learning outcomes and increased workload introduced by doing different types of client‐based company projects each term.

After completion of the case study, the students will be able to understand the different risks associated with a business, focusing on price risk and the importance of price risk management in business; understand and evaluate the products available for hedging price risk through exchange-traded derivatives in the Indian scenario; and understand and evaluate the different strategies for price risk management through exchange-traded derivatives in the Indian scenario.

The case study pertains to a small business, M/s Sethi Jewellers. The enterprise is being run by Shri Charan Jeet Sethi and his son Tejinder Sethi. The business is located in Jain Bazar, Jammu, UT, in Northern India. The business was started in 1972 by Charan Jeet’s father. They deal in a wide range of jewelry products and are well-established jewelers known for selling quality ornaments. Tejinder (MBA in marketing) was instrumental in revamping his business recently. Under his leadership, the business has experienced rapid transformation. The business has grown from a one-room shop fully managed by Tejinder’s grandfather to a multistory showroom with several artisans, sales staff and security persons. Through his e-store, Tejinder has a bulk order from a client where the client requires him to accept the order with a small token at the current price and deliver the final product three months from now. Tejinder is in a dilemma about accepting or rejecting the large order. Second, if he accepts, should he buy the entire gold now or wait to buy it later at a lower price? He is also considering hedging the price risk through exchange-traded derivatives. However, he is not entirely sure, as he has a few apprehensions regarding the same, and he is also not fully aware of the process and the instruments he has to use for hedging the price risk on the exchange.

The case study is aimed to cater to undergraduate, postgraduate and MBA students in the field of finance. This case study can be used for students interested in commodity derivatives, risk management and market microstructure.

Teaching notes are available for educators only.

CSS 1: Accounting and finance.