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Foreign currency derivative use and shareholder value

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  • Belghitar, Yacine
  • Clark, Ephraim
  • Mefteh, Salma

Abstract

This paper investigates the effect of foreign currency (FC) derivative use on shareholder value. Exposures are broken down by currency, by whether the currency is appreciating or depreciating and by whether exposures are symmetric or asymmetric. We find that derivatives are effective in reducing overall FC exposure but there is no evidence of value creation through the application of a program that identifies and targets only loss causing exposures. We also find that FC derivative use has no significant effect on firm value in the overall sample and when the sample is broken down by exposure type and derivative product.

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  • Belghitar, Yacine & Clark, Ephraim & Mefteh, Salma, 2013. "Foreign currency derivative use and shareholder value," International Review of Financial Analysis, Elsevier, vol. 29(C), pages 283-293.
    • Handle: RePEc:eee:finana:v:29:y:2013:i:c:p:283-293
    DOI: 10.1016/j.irfa.2012.02.004
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    4. Lau, Chee Kwong, 2016. "How corporate derivatives use impact firm performance?," Pacific-Basin Finance Journal, Elsevier, vol. 40(PA), pages 102-114.
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    11. Jerome Geyer-Klingeberg & Markus Hang & Andreas W. Rathgeber & Stefan Stöckl & Matthias Walter, 2018. "What do we really know about corporate hedging? A meta-analytical study," Business Research, Springer;German Academic Association for Business Research, vol. 11(1), pages 1-31, February.
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    More about this item

    Keywords

    Foreign currency exposure; Asymmetric exposure; Foreign currency hedging; Derivatives; Firm value;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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