Corporate Hedging and Shareholder Value

  title={Corporate Hedging and Shareholder Value},
  author={Kevin Aretz and S{\"o}hnke M. Bartram},
  journal={Financial Accounting},
According to financial theory, corporate hedging can increase shareholder value in the presence of capital market imperfections such as direct and indirect costs of financial distress, costly external financing, and taxes. This paper presents a comprehensive review of the extensive existing empirical literature that has tested these theories, documenting overall mixed empirical support for rationales of hedging with derivatives at the firm level. While various empirical challenges and… 

Corporate Hedging and Speculation with Derivatives

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Classic financial theory relies on the absolute perfection of capital markets, which results in one of the milestones of theoretical corporate finance: the firm´s value is invariant to the choice of

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We present a new approach to test the financial distress costs theory of corporate hedging empirically. We estimate the ex ante expected financial distress costs, which serve as a starting point to

Corporate hedging and the cost of debt

The determinants of currency derivatives usage among Indian non-financial firms: An empirical study

Purpose Theoretical studies suggest that hedging helps firms to reduce their financial distress costs and underinvestment problem especially if the markets are imperfect. Hence hedging,

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This literature review focuses on the financial derivatives and its use in corporate risk management and hedging risks from different dimensions in corporate scenario. Literatures are analysed from



The Use of Options in Corporate Risk Management

This paper investigates the motivations and practice of nonfinancial firms with regard to using financial options in their risk management activities. To this end, it provides a comprehensive account

Determinants of corporate hedging and derivatives: A revisit

The Strategic Motives for Corporate Risk Management

This paper demonstrates that a firm's need to hedge depends on the extent of hedging in its industry. When many firms in an industry experience common cost shocks, prices co-vary with costs providing

Investment, Debt and Risk Management in a Context of Uncertain Returns to Investment

In a context of uncertain returns to investment, a firm may face increasing costs of borrowing and uncertain value of its internal finance. By trading derivatives on the financial markets, the firm

Corporate Governance and the Hedging Premium Around the World

This paper examines the use of foreign currency derivatives (FCDs) as a proxy for risk management and its potential impact on firm value in a broad sample of firms from thirty-nine countries between

Financing Policy, Basis Risk, and Corporate Hedging: Evidence from Oil and Gas Producers

This paper studies the hedging policies of oil and gas producers between 1992 and 1994. My evidence shows that the extent of hedging is related to financing costs. In particular, companies with

The Use of Foreign Currency Derivatives, Corporate Governance, and Firm Value Around the World

This paper examines the impact of currency derivatives on firm value using a broad sample of firms from thirty-nine countries with significant exchange-rate exposure. Derivatives can be used for

Evidence on Corporate Hedging Policy

  • Shehzad L. Mian
  • Economics, Business
    Journal of Financial and Quantitative Analysis
  • 1996
Abstract This paper provides empirical evidence on the determinants of corporate hedging decisions. The paper examines the evidence in light of currently mandated financial reporting requirements

Corporate Incentives for Hedging and Hedge Accounting

This article explores the information effect of financial risk management. Financial hedging improves the informativeness of corporate earnings as a signal of management ability and project quality

International Evidence on Financial Derivatives Usage

Theory predicts that nonfinancial corporations might use derivatives to lower financial distress costs, coordinate cash flows with investment, or resolve agency conflicts between managers and owners.