The Effects of Derivatives on Firm Risk and Value

  title={The Effects of Derivatives on Firm Risk and Value},
  author={S{\"o}hnke M. Bartram and Gregory W. Brown and Jennifer S. Conrad},
  journal={Journal of Financial and Quantitative Analysis},
  pages={967 - 999}
Abstract Using a large sample of nonfinancial firms from 47 countries, we examine the effect of derivative use on firm risk and value. We control for endogeneity by matching users and nonusers on the basis of their propensity to use derivatives. We also use a new technique to estimate the effect of omitted variable bias on our inferences. We find strong evidence that the use of financial derivatives reduces both total risk and systematic risk. The effect of derivative use on firm value is… 
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