2021 development issues of innovative economy in the agricultural sector

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METHODS 
An imperfect view of risk management in capital markets is discussed in Smith and Stulz (1985) 
and further developed in Froot, Scharfstein and Stein. According to Froot et al., The firm's production 
function is concave and outside financing is expensive; these assumptions guarantee that fluctuations in 
internal funds destroy the value of the firm.
It is assumed that a negative shock to domestic funds cannot be compensated without cost by an 
increase in external financing and thus leads to a decrease in investment; this has a large impact on the 
firm's profits because the marginal product of investment is high when the investment is low.
The spirit of Smith and Stulz is similar: hedging reduces the likelihood of financial distress, which 
increases the value of the firm because of the external fixed costs of bankruptcy. 
Empirical work to test these ideas usually focuses on the use of derivatives by firms. Some papers 
analyze broad cross-sections of non-financial companies, while others analyze specific industries (such as 
gold mining or banking) in which the use of derivatives is especially common.

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31 
 
 
“DEVELOPMENT ISSUES OF INNOVATIVE ECONOMY IN 
 
THE AGRICULTURAL SECTOR”
 
International scientific-practical conference on March 25-26, 2021. 
Web: 
http://conference.sbtsue.uz/uz
 
The table below summarizes the results of a representative sample of documents on the 
relationship between the use of derivatives and measures of financial friction or cash flows relative to 
investment opportunities. 
3.0
 
RESULTS 
Risk strategic management requires planning that defines the relationship between all important 
areas of enterprise activity, risks, and processes designed to reduce risks across the enterprise. Company 
management should protect and question strategic risk management. Sometimes risks can also be a business 
opportunity for a business.