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Hedging with derivatives to increase firm value

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  • Ji, Pengfei
  • Wei, Lei

Abstract

In uncertain financial environments, firms apply derivatives to hedge on risks such as commodity, interest, and currency usage. Based on non-financial listed companies from 2013 to 2022, this paper applies regression analysis and score matching method to examine the relationship between firm value and application of derivatives. It found that hedging increases the value of firms. We further use PSM and alternative variables to conduct robustness analysis and find out results are robust.

Suggested Citation

  • Ji, Pengfei & Wei, Lei, 2023. "Hedging with derivatives to increase firm value," Finance Research Letters, Elsevier, vol. 55(PB).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003537
    DOI: 10.1016/j.frl.2023.103981
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    References listed on IDEAS

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    6. Sung C. Bae & Hyeon Sook Kim & Taek Ho Kwon, 2018. "Currency derivatives for hedging: New evidence on determinants, firm risk, and performance," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(4), pages 446-467, April.
    7. Huang, Pinghsun & Kabir, M. Humayun & Zhang, Yan, 2017. "Does Corporate Derivative Use Reduce Stock Price Exposure? Evidence From UK Firms," The Quarterly Review of Economics and Finance, Elsevier, vol. 65(C), pages 128-136.
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    Cited by:

    1. Li, Jianjun & Wu, Zhouyi & Yu, Kaijia & Zhao, Wei, 2024. "The effect of industrial robot adoption on firm value: Evidence from China," Finance Research Letters, Elsevier, vol. 60(C).

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