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The Association Between Firm Characteristics and the Use of a Comprehensive Corporate Hedging Strategy: An Ordered Probit Analysis

Author

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  • Hue Hwa Au Yong, Robert Faff,Hoa Nguyen

    (University of Queensland, Australia)

Abstract

We investigate the potential factors that influence the corporate decision to collectively use foreign currency; interest rate; and commodity derivatives and foreign debt. Our Australian results show that firm size (‘scale economies’ hypothesis); leverage (‘financial distress cost’ hypothesis); and block holdings are positively associated with the comprehensive hedging decision, while executive shareholdings has a negative association. However, we do not find any support for the underinvestment or managerial risk aversion hypotheses.

Suggested Citation

  • Hue Hwa Au Yong, Robert Faff,Hoa Nguyen, 2011. "The Association Between Firm Characteristics and the Use of a Comprehensive Corporate Hedging Strategy: An Ordered Probit Analysis," Frontiers in Finance and Economics, SKEMA Business School, vol. 8(1), pages 1-16, April.
    • Handle: RePEc:ffe:journl:v:8:y:2011:i:1:p:1-16
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    More about this item

    Keywords

    derivative use; coordinated corporate hedging strategy; ordered probit analysis;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • 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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