The Effects of Derivatives on Firm Risk and Value

@article{Bartram2011TheEO,
  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},
  year={2011},
  volume={46},
  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… 
Does the use of derivatives affect firm value? Evidence from Turkey
ABSTRACT In the study, the effect of derivative usage on the firm’s value is examined by testing 72 Turkish non-financial firms from 2009 to 2013. The aim of the study is to determine whether the use
Does derivatives use reduce the cost of equity?
The Effect of Financial Derivatives Usages on Commercial Banks Risk and Value : Evidence from European Markets
We use a new set of data containing European banks operating in 25 countries to analyze the effect of derivative use on measure of risk and value. We find that using derivatives does seem to increase
Corporate Derivatives Use and the Cost of Equity
We investigate the relation between derivatives use and corporations' cost of equity capital. Using a large sample of non-financial firms, we compute and analyze (i) the relative cost of equity of
Financial derivatives and bank risk: evidence from eighteen developed markets
We examine the relationship between equity risk and the use of financial derivatives with a sample of 555 banks from eighteen developed markets from 2006 to 2015. Our main findings suggest that
The influence of derivatives usage on firm value
In contemporary business management, an increasing number of firms use derivative instruments to hedge financial risks, including interest rate, foreign exchange rate and commodity price risk. Such
The use of derivatives in Nordic firms
We contribute to the previous literature on the use of derivatives by studying separately the determinants of profit seeking versus those of hedging. In our sample of listed firms from four Nordic
The Impact of Derivatives Usage on Firm Value: Evidence from Greece
This paper presents evidence on the use of derivative contracts in the risk management process of Greek non-financial firms and its potential impact on firm value. The sample of the research consists
Real Implications of Corporate Risk Management: Review of Main Results and New Evidence From a Different Methodology
This study revisits the question of whether risk management has real implications on firm value, risk, and accounting performance using a new dataset on the hedging activities of U.S. oil producers.
...
...

References

SHOWING 1-10 OF 74 REFERENCES
The Use of Foreign Currency Derivatives and Firm Market Value
This article examines the use of foreign currency derivatives (FCDs) in a sample of 720 large U.S. nonfinancial firms between 1990and 1995 and its potential impact on firm value. Using Tobin’s Q as a
On the Determinants of Corporate Hedging
Finance theory indicates that hedging increases firm value by reducing expected taxes, expected costs of financial distre ss, or other agency costs. This paper provides evidence on these hypothe ses
How Are Derivatives Used? Evidence from the Mutual Fund Industry
We investigate investment managers' use of derivatives by comparing return distributions for equity mutual funds that use and do not use derivatives. In contrast to public perception, derivative
How Much Do Firms Hedge with Derivatives
Exchange Rate Exposure, Hedging, and the Use of Foreign Currency Derivatives
Are Corporations Reducing or Taking Risks with Derivatives?
Abstract Public discussion about corporate use of derivatives focuses on whether firms use derivatives to reduce or increase firm risk. In contrast, empirical academic studies of corporate dervatives
A survey into the use of derivatives by large non‐financial firms operating in Belgium
Empirical evidence on the use of derivatives for risk management on the European continent is virtually non-existent. To fill this gap, our survey documents the usage of derivatives by non-financial
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.
...
...