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The use of Fx derivatives and the cost of capital: Evidence of Brazilian companies


  • Coutinho, João Ricardo Ribeiro
  • Sheng, Hsia Hua
  • Lora, Mayra Ivanoff


Large 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.

Suggested Citation

  • Coutinho, João Ricardo Ribeiro & Sheng, Hsia Hua & Lora, Mayra Ivanoff, 2012. "The use of Fx derivatives and the cost of capital: Evidence of Brazilian companies," Emerging Markets Review, Elsevier, vol. 13(4), pages 411-423.
  • Handle: RePEc:eee:ememar:v:13:y:2012:i:4:p:411-423
    DOI: 10.1016/j.ememar.2012.07.001

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    References listed on IDEAS

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    Cited by:

    1. Keffala, Mohamed Rochdi, 2015. "How using derivatives affects bank stability in emerging countries? Evidence from the recent financial crisis," Research in International Business and Finance, Elsevier, vol. 35(C), pages 75-87.
    2. repec:wsi:rpbfmp:v:20:y:2017:i:01:n:s0219091517500047 is not listed on IDEAS
    3. Atilgan, Yigit & Demirtas, K. Ozgur & Simsek, Koray D., 2016. "Derivative markets in emerging economies: A survey," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 88-102.


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