Currency hedging and corporate governance: A cross-country analysis

Lel, Uǧur

doi:10.1016/j.jcorpfin.2011.12.002

Cited by 109 publications

(129 citation statements)

References 89 publications

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“…For this reason, we encourage academics to widen their empirical work towards the analysis of more recent theoretical developments of classical financial theory as, for example, the influence of the time horizon on the hedging motivation of financially distressed firms (Kürsten and Linde 2011), hedging as a consequence of good corporate governance (Lel 2012), as well as behavioristic theories like, for example, the managerial overconfidence hypothesis (Adam et al 2015).…”

Section: Resultsmentioning

confidence: 99%

What do we really know about corporate hedging? A meta-analytical study

Geyer‐Klingeberg

Hang

Rathgeber

et al. 2017

Bus Res

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This paper employs meta-analysis to aggregate and systematically analyze the mixed empirical evidence on the determinants of corporate hedging reported in 132 previously published studies covering data from more than 73,000 firms. Among the fourteen proxy variables analyzed by multivariate meta-analysis, three variables emerge as reliable explanatory factors for corporate hedging decisions supporting the bankruptcy and financial distress hypothesis: dividend yield (positive sign), liquidity (negative sign), and firm size (positive sign). Moreover, for tax-loss carry forwards (positive sign) and research and development (positive sign), our findings indicate a weak impact on corporate hedging behavior reflecting tax reasons, the coordination between financing and investment, and agency conflicts between shareholders and debtholders. Regarding the asymmetric information and agency conflicts of equity hypothesis, we find no explanatory power. The further analysis of heterogeneity via meta-regression reveals several factors that determine the mixed empirical evidence reported in previous studies. First, the results indicate that studies analyzing firms from North America report, on average, a lower impact of leverage on the corporate hedging decision. Moreover, studies examining more recent data samples tend to find a weaker relation between tangible assets and hedging, R&D and hedging, respectively. Overall, our results encourage scientific research to put more emphasis on finer-grained examinations of hedging variations and to discover rationales of corporate hedging extending classical financial theories.

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Section: Resultsmentioning

confidence: 99%

What do we really know about corporate hedging? A meta-analytical study

Geyer‐Klingeberg

Hang

Rathgeber

et al. 2017

Bus Res

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“…2 For selected, commodity-based industries (e.g., oil, gold), sometimes more detailed information about the use of derivatives is available, enabling empirical studies to use variables such as (net) notional values of derivatives or the percentage of production hedged, which might more accurately measure the extent of corporate hedging (Lel, 2006;Dionne and Triki, 2005;Haushalter, 2001;Tufano, 1996).…”

Section: Theory and Evidence Of Value Creation Through Corporate Riskmentioning

confidence: 99%

“…exchange rate or interest rate risk (Bartram, Brown and Fehle, 2009;Graham and Rogers, 2002), commodity price risk (Géczy et al, 2006;Haushalter, 2000), or alternative risk management strategies that do not involve derivatives (Petersen and Thiagarajan, 2000). 4 Some studies investigate the impact of corporate governance on the importance of different rationales for hedging at the firm level (Lel, 2006). To illustrate, managers may use corporate hedging to increase the utility of their compensation packages particularly in firms with weak governance.…”

Section: Theory and Evidence Of Value Creation Through Corporate Riskmentioning

confidence: 99%

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Corporate Hedging and Shareholder Value

Aretz

Bartram

2010

J of Financial Research

132

118

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According to financial theory, corporate hedging can increase shareholder value in the presence of capital market imperfections such as direct and indirect costs of financial distress, costly external financing, and taxes. This paper presents a comprehensive review of the extensive existing empirical literature that has tested these theories, documenting overall mixed empirical support for rationales of hedging with derivatives at the firm level. While various empirical challenges and limitations advise some caution with regard to the interpretation of the existing evidence, the results are, however, consistent with derivatives use being just one part of a broader financial strategy that considers the type and level of financial risks, the availability of risk-management tools, and the operating environment of the firm. In particular, recent evidence suggests that derivatives use is related to debt levels and maturity, dividend policy, holdings of liquid assets, and the degree of operating hedging. Moreover, corporations do not just use financial derivatives, but rely heavily on pass-through, operational hedging, and foreign currency debt to manage financial risk. Keywords Corporate Hedging and Shareholder Value AbstractAccording to financial theory, corporate hedging can increase shareholder value in the presence of capital market imperfections such as direct and indirect costs of financial distress, costly external financing, and taxes. This paper presents a comprehensive review of the extensive existing empirical literature that has tested these theories, documenting overall mixed empirical support for rationales of hedging with derivatives at the firm level. While various empirical challenges and limitations advise some caution with regard to the interpretation of the existing evidence, the results are, however, consistent with derivatives use being just one part of a broader financial strategy that considers the type and level of financial risks, the availability of risk-management tools, and the operating environment of the firm. In particular, recent evidence suggests that derivatives use is related to debt levels and maturity, dividend policy, holdings of liquid assets, and the degree of operating hedging. Moreover, corporations do not just use financial derivatives, but rely heavily on pass-through, operational hedging, and foreign currency debt to manage financial risk.

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“…W swoich pracach Lel (2012) oraz Allayanis i in. (2012) stawiają hipotezę dotyczącą związku pomiędzy nadzorem korporacyjnym spół-ek a wykorzystaniem instrumentów pochodnych.…”

Section: Tabelaunclassified

The use of derivatives and agency problem

Stróżyńska¹

2015

Zesz. Nauk. US Fin. Ryn. Fin. Ubezp.

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Streszczenie: Celem artykułu jest syntetyczna prezentacja zależności zachodzących pomiędzy wykorzystaniem instrumentów pochodnych oraz występującym w przedsiębiorstwach problemem agencji i poziomem nadzoru korporacyjnego. W przedstawionym artykule dokonano systematyki wzajemnych relacji występujących pomiędzy problemem agencji oraz nadzorem korporacyjnym a wykorzystaniem derywatów z uwzględnieniem rzeczywistego motywu ich wykorzystania -zabezpieczenia przed ryzykiem lub spekulacji. Motywacją do przyjęcia tak postawionego celu stała się zauważalna w przeprowadzanych na świecie badaniach niejednoznaczność wskazań oraz nierzadko przeciwstawna interpretacja badanych zależności. W celu realizacji głównych zamierzeń, przeprowadzono studia literaturowe, dokonując przeglądu literatury anglojęzycznej. Wartością artykułu jest wytyczenie podstaw, na gruncie których możliwa stałaby się próba przełożenia teoretycznych i empirycznych wskazań na badania polskich spółek. 1 W niniejszym artykule termin "derywaty" stosuje się synonimicznie z terminem "instrumenty pochodne". 2 Spółki niefinansowe utożsamia się z podmiotami spoza szeroko rozumianego sektora finansowego. ZESZYTY NAUKOWE UNIWERSYTETU SZCZECIŃSKIEGO nr 855Finanse, Rynki Finansowe, Ubezpieczenia nr 74, t. 1 (2015)

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Currency hedging and corporate governance: A cross-country analysis

Cited by 109 publications

References 89 publications

What do we really know about corporate hedging? A meta-analytical study

What do we really know about corporate hedging? A meta-analytical study

Corporate Hedging and Shareholder Value

The use of derivatives and agency problem

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