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The Impact of Derivatives Usage on Firm Value: Evidence from Greece

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  • KAPITSINAS, SPYRIDON

Abstract

This paper presents evidence on the use of derivative contracts in the risk management process of Greek non-financial firms and its potential impact on firm value. The sample of the research consists of 81 Greek non-financial firms with exposure to financial risks that are listed in the Athens Stock Exchange and have their annual report published according to the International Financial Reporting Standards (I.F.R.S) for the years 2004-2006. The subject of investigation is whether hedging with derivatives materially increases firm value as many related research has proven, or whether hedging does not affect firm value and can be attributed to managerial or other motives. Having used Tobin’s Q as a proxy for firm value a positive and significant effect of hedging on it is verified, 4.6% of firm value on average, not only concerning the general use of derivatives, but also the use of foreign exchange derivatives and interest rate derivatives in particular. Controlling for managerial motives does not change the sign of the hedging premium, nor its magnitude.

Suggested Citation

  • Kapitsinas, Spyridon, 2008. "The Impact of Derivatives Usage on Firm Value: Evidence from Greece," MPRA Paper 10947, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:10947
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    File URL: https://mpra.ub.uni-muenchen.de/10947/1/MPRA_paper_10947.pdf
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    References listed on IDEAS

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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. Yulia Titova & Henry Penikas & Nikita Gomayun, 2020. "The impact of hedging and trading derivatives on value, performance and risk of European banks," Empirical Economics, Springer, vol. 58(2), pages 535-565, February.
    3. Bessler, Wolfgang & Conlon, Thomas & Huan, Xing, 2019. "Does corporate hedging enhance shareholder value? A meta-analysis," International Review of Financial Analysis, Elsevier, vol. 61(C), pages 222-232.
    4. Nikita Gomayun & Henry Penikas & Yulia Titova, 2012. "Do Hedging and Trading Derivatives Have the Same Impact on Public European Banks' Value and Share Performance?," HSE Working papers WP BRP 09/FE/2012, National Research University Higher School of Economics.

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    More about this item

    Keywords

    risk management; financial risk; derivatives; corporate finance; Greece;
    All these keywords.

    JEL classification:

    • 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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