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Corporate financial hedging and firm value: a meta-analysis

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  • Jerome Geyer-Klingeberg
  • Markus Hang
  • Andreas Rathgeber

Abstract

This study is a quantitative review of the empirical literature analyzing firm value effects of corporate financial hedging. Using meta-regression analysis to accumulate a hand-collected data set of 1016 estimates for the hedging premium reported in 71 previous studies, we find that reported firm value effects of hedging are systematically larger for foreign exchange hedgers as compared to interest rate and commodity price hedgers, for studies published in lower-ranked journals, and for models estimated without firm fixed effects and without controls for endogeneity. Our results also suggest that hedging premiums increase significantly when a study considers operational hedging strategies in addition to financial hedging. Moreover, we find evidence for a larger hedging premium in less developed financial markets and countries with higher tax rates. Aggregating the previous hedging literature and assuming a ‘best practice’ study design, we find an overall hedging premium of 1.8% for foreign currency hedgers and a firm value discount of −0.8% (−0.6%) for interest rate (commodity price) hedgers.

Suggested Citation

  • Jerome Geyer-Klingeberg & Markus Hang & Andreas Rathgeber, 2021. "Corporate financial hedging and firm value: a meta-analysis," The European Journal of Finance, Taylor & Francis Journals, vol. 27(6), pages 461-485, April.
    • Handle: RePEc:taf:eurjfi:v:27:y:2021:i:6:p:461-485
    DOI: 10.1080/1351847X.2020.1816559
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    3. Oyegbile Akeem Bamidele, 2024. "Hedging with Financial Derivatives and Firm Performance of Consumer Goods Companies Listed on Nigeria Exchange Group," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(1), pages 2358-2373, January.
    4. Jorge Feregrino & Juan Felipe Espinosa-Cristia & Nelson Lay & Luis Leyton, 2022. "Inappropriate Corporate Strategies: Latin American Companies That Increase Their Value by Short-Term Liabilities," IJFS, MDPI, vol. 10(4), pages 1-15, October.
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