IDEAS home Printed from https://ideas.repec.org/a/bla/finrev/v45y2010i3p803-824.html
   My bibliography  Save this article

Corporate Hedging Policy and Equity Mispricing

Author

Listed:
  • J. Barry Lin
  • Christos Pantzalis
  • Jung Chul Park

Abstract

We show that firms' use of derivatives is negatively associated with stock mispricing. This result is consistent with the notion that hedging improves the transparency and predictability of firms' cash flows resulting in less misvaluation. Furthermore, we show that the negative relationship between mispricing and hedging is particularly strong when market value is below fundamental value, which is consistent with prior evidence that hedging has a positive impact on firm valuation. Finally, we provide evidence that a "spread-out" hedging policy that entails the use of a variety of derivative contracts can be more effective in reducing mispricing. Copyright (c) 2010, The Eastern Finance Association.

Suggested Citation

  • J. Barry Lin & Christos Pantzalis & Jung Chul Park, 2010. "Corporate Hedging Policy and Equity Mispricing," The Financial Review, Eastern Finance Association, vol. 45(3), pages 803-824, August.
  • Handle: RePEc:bla:finrev:v:45:y:2010:i:3:p:803-824
    as

    Download full text from publisher

    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1540-6288.2010.00272.x
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:kap:rqfnac:v:49:y:2017:i:1:d:10.1007_s11156-016-0586-9 is not listed on IDEAS
    2. Andrikopoulos, Andreas, 2015. "Truth and financial economics: A review and assessment," International Review of Financial Analysis, Elsevier, vol. 39(C), pages 186-195.
    3. repec:spr:busres:v:11:y:2018:i:1:d:10.1007_s40685-017-0052-0 is not listed on IDEAS
    4. Chansog Kim & Christos Pantzalis & Jung Chul Park, 2014. "Do Family Owners Use Firm Hedging Policy to Hedge Personal Undiversified Wealth Risk?," Financial Management, Financial Management Association International, vol. 43(2), pages 415-444, June.
    5. Arnold, Matthias M. & Rathgeber, Andreas W. & Stöckl, Stefan, 2014. "Determinants of corporate hedging: A (statistical) meta-analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(4), pages 443-458.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:finrev:v:45:y:2010:i:3:p:803-824. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/efaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.