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The wealth effect of swap usage in the food processing industry

Author

Listed:
  • Jian Yang

    (Texas A&M University)

  • David J. Leatham

    (Texas A&M University)

  • Spencer A. Case

    (Texas A&M University)

Abstract

U.S. companies use interest rate swaps more than any other financial derivative. The effect of swap usage on the shareholders' wealth is both controversial and unclear. Using a sample from the food processing industry, we examined both short-run and long-run wealth effects associated with swap usage. A significant long-run wealth effect of swap usage on swap users was not found. However, there was a significant negative wealth effect during a short period before firms first disclosed swap usage to the SEC. This finding is consistent with the argument that derivative usage may not be in the best interest of shareholders. © 2000 John Wiley & Sons, Inc.

Suggested Citation

  • Jian Yang & David J. Leatham & Spencer A. Case, 2000. "The wealth effect of swap usage in the food processing industry," Agribusiness, John Wiley & Sons, Ltd., vol. 16(3), pages 367-379.
    • Handle: RePEc:wly:agribz:v:16:y:2000:i:3:p:367-379
    DOI: 10.1002/1520-6297(200022)16:3<367::AID-AGR8>3.0.CO;2-4
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    References listed on IDEAS

    as
    1. Brewer, Elijah, III & Jackson, William E, III & Moser, James T, 1996. "Alligators in the Swamp: The Impact of Derivatives on the Financial Performance of Depository Institutions," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(3), pages 482-497, August.
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