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The Effects Of Financial Risk Management On Firm’S Value: An Empirical Evidence From Borsa Istanbul Stock Exchange

Author

Listed:
  • ŞENOL, Zekai

    (Cumhuriyet University, Faculty of Economics and Administrative Sciences, Banking and Finance)

  • KARACA, Süleyman Serdar

    (Gaziosmanpaşa University, Faculty of Economics and Administrative Sciences, Department of Business)

  • ERDOĞAN, Seda

    (Gaziosmanpaşa University)

Abstract

World trade volume shows rising trend and financial markets have been deepening. Firms that operate in the framework of economic and financial structure are affected by fluctuations in different factors such as interest rate, exchange rate and commodity prices. In this context, the use of derivatives allow companies to manage controllable risk and are preferred within the scope of financial risk management for the purpose of hedging. The prime aim of this research is to detect both the effect of derivatives in the financial risk management proves and financial risk management determinants by employing panel data analysis technique and panel logistic regression model. In order to accomplish this purpose, 248 observations of 31 companies listed in the BIST from 2008 to 2015 are analysed. The main outcome of research demonstrates that the financial risk management has no effect on the firm value. In addition, according to the research, determinants of Financial Risk Management detected are as fallows; the variables of financial leverage, exchange rate risk, firm size and geographical diversity.

Suggested Citation

  • ŞENOL, Zekai & KARACA, Süleyman Serdar & ERDOĞAN, Seda, 2017. "The Effects Of Financial Risk Management On Firm’S Value: An Empirical Evidence From Borsa Istanbul Stock Exchange," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 21(4), pages 27-45.
  • Handle: RePEc:vls:finstu:v:21:y:2017:i:4:p:27-45
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    References listed on IDEAS

    as
    1. Eckles, David L. & Hoyt, Robert E. & Miller, Steve M., 2014. "The impact of enterprise risk management on the marginal cost of reducing risk: Evidence from the insurance industry," Journal of Banking & Finance, Elsevier, vol. 43(C), pages 247-261.
    2. Yanbo Jin & Philippe Jorion, 2006. "Firm Value and Hedging: Evidence from U.S. Oil and Gas Producers," Journal of Finance, American Finance Association, vol. 61(2), pages 893-919, April.
    3. Francisco Pérez-González & Hayong Yun, 2013. "Risk Management and Firm Value: Evidence from Weather Derivatives," Journal of Finance, American Finance Association, vol. 68(5), pages 2143-2176, October.
    4. Peter Mackay & Sara B. Moeller, 2007. "The Value of Corporate Risk Management," Journal of Finance, American Finance Association, vol. 62(3), pages 1379-1419, June.
    5. David A. Carter & Daniel A. Rogers & Betty J. Simkins, 2006. "Does Hedging Affect Firm Value? Evidence from the US Airline Industry," Financial Management, Financial Management Association International, vol. 35(1), pages 53-86, March.
    6. Daniel Hoechle, 2007. "Robust standard errors for panel regressions with cross-sectional dependence," Stata Journal, StataCorp LP, vol. 7(3), pages 281-312, September.
    7. Allayannis, George & Weston, James P, 2001. "The Use of Foreign Currency Derivatives and Firm Market Value," Review of Financial Studies, Society for Financial Studies, vol. 14(1), pages 243-276.
    8. Christoffersen, Peter, 2011. "Elements of Financial Risk Management," Elsevier Monographs, Elsevier, edition 2, number 9780123744487.
    9. Giorgio Stefano Bertinetti & Elisa Cavezzali & Gloria Gardenal, 2013. "The effect of the enterprise risk management implementation on the firm value of European companies," Working Papers 10, Department of Management, Università Ca' Foscari Venezia.
    10. Smith, Clifford W. & Stulz, René M., 1985. "The Determinants of Firms' Hedging Policies," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 20(04), pages 391-405, December.
    11. Eckles, David L. & Hoyt, Robert E. & Miller, Steve M., 2014. "Reprint of: The impact of enterprise risk management on the marginal cost of reducing risk: Evidence from the insurance industry," Journal of Banking & Finance, Elsevier, vol. 49(C), pages 409-423.
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    More about this item

    Keywords

    Financial Risk Management; Derivatives; Panel Data Analysis;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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