The Impact of Derivatives Usage on Firm Value: Evidence from Greece
AbstractThis 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 of 81 Greek non-financial firms with exposure to financial risks that are listed in the Athens Stock Exchange and have their annual report published according to the International Financial Reporting Standards (I.F.R.S) for the years 2004-2006. The subject of investigation is whether hedging with derivatives materially increases firm value as many related research has proven, or whether hedging does not affect firm value and can be attributed to managerial or other motives. Having used Tobin’s Q as a proxy for firm value a positive and significant effect of hedging on it is verified, 4.6% of firm value on average, not only concerning the general use of derivatives, but also the use of foreign exchange derivatives and interest rate derivatives in particular. Controlling for managerial motives does not change the sign of the hedging premium, nor its magnitude.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 10947.
Date of creation: 30 Sep 2008
Date of revision:
risk management; financial risk; derivatives; corporate finance; Greece;
Find related papers by JEL classification:
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-10-13 (All new papers)
- NEP-EEC-2008-10-13 (European Economics)
- NEP-RMG-2008-10-13 (Risk Management)
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