The use of Fx derivatives and the cost of capital: Evidence of Brazilian companies
AbstractLarge corporations have been using derivative instruments as a tool to protect their indirect exposure, as FX risks. A sample with 47 non-financial Bovespa Listed Brazilian companies from 2004 and 2010 was used to test the hypothesis that use of derivatives as a risk management policy tool reduces companies' cost of capital. In contrast to other countries, results rejected this hypothesis, showing that in Brazil there is a positive relationship between using these tools and cost of capital. However, a more in-depth analysis based on the TACC model for a Brazilian company, this hypothesis was not rejected after the 2008 crisis.
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Bibliographic InfoArticle provided by Elsevier in its journal Emerging Markets Review.
Volume (Year): 13 (2012)
Issue (Month): 4 ()
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Web page: http://www.elsevier.com/locate/inca/620356
Derivatives; Cost of capital; WACC; Risk capital; Hedge; Risk management; Non-financial companies (or non-financials in market jargon);
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