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Does the Use of Foreign Currency Derivatives Affect Firms' Market Value? Evidence from Colombia

Author

Listed:
  • José Eduardo Gómez-González
  • Carlos Eduardo León Rincón
  • Karen Juliet Gómez-González

Abstract

This study tests the effects of risk management and hedging decisions on firms' market value. Using information on Colombian nonfinancial firms and the locale's most liquid derivatives market, we find that for a panel of eighty-one large Colombian corporations the growth rate of Tobin's q depends significantly on a firm's size and hedging. Our results suggest that an increase in hedging leads to a higher growth in the firms' value.

Suggested Citation

  • José Eduardo Gómez-González & Carlos Eduardo León Rincón & Karen Juliet Gómez-González, 2012. "Does the Use of Foreign Currency Derivatives Affect Firms' Market Value? Evidence from Colombia," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(4), pages 50-66, July.
    • Handle: RePEc:mes:emfitr:v:48:y:2012:i:4:p:50-66
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    Citations

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    Cited by:

    1. Bachiller, Patricia & Boubaker, Sabri & Mefteh-Wali, Salma, 2021. "Financial derivatives and firm value: What have we learned?," Finance Research Letters, Elsevier, vol. 39(C).
    2. Ahmet Duran & Mahmut Sami Gungor, 2017. "Aviation Fuel Hedging and Firm Value Analysis using Dynamic Panel Data Methodology: Evidence from the U.S. Major Passenger Airlines," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 10(3), pages 67-72, September.
    3. Gamze Ozturk Danisman & Pelin Demirel, 2019. "Corporate risk management practices and firm value in an emerging market: a mixed methods approach," Risk Management, Palgrave Macmillan, vol. 21(1), pages 19-47, March.
    4. Jyoti Prakash Das & Shailendra Kumar, 2023. "Impact of corporate hedging practices on firm's value: An empirical evidence from Indian MNCs," Risk Management, Palgrave Macmillan, vol. 25(2), pages 1-35, June.
    5. Fernando Avalos & Ramon Moreno, 2013. "Hedging in derivatives markets: the experience of Chile," BIS Quarterly Review, Bank for International Settlements, March.

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