Derivative usage and firm value: The influence of agency costs and monitoring problems

Fauver, Larry; Naranjo, Andy

doi:10.1016/j.jcorpfin.2010.09.001

Cited by 105 publications

(98 citation statements)

References 92 publications

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“…Existen autores que indican que la relación positiva entre los derivados y el valor de la empresa es débil y no significativa (Belghitar, Clark y Mefteh, 2013;Guay y Kothari, 2003;Jin y Jorion, 2006), e incluso algunos señalan que el uso de estos instrumentos genera un descuento por cobertura (Fauver y Naranjo, 2010;Nguyen y Faff, 2010). Así, por ejemplo, Bartram, Brown y Conrad (2011) encuentran que el uso de derivados impacta positivamente en el valor de la firma; sin embargo, indican que estos resultados son muy sensibles al sesgo de selección de la muestra, a las variables de control escogidas y al método de estimación.…”

Section: Revisión De La Literatura E Hipótesisunclassified

“…X it corresponde a un vector que representa un conjunto de variables de control. Siguiendo trabajos anteriores (Allayannis y Weston, 2001;Allayannis, Lel y Miller, 2012;Bartram, Brown y Conrad, 2011;Belghitar, Clark y Judge, 2013;Fauver y Naranjo, 2010;Saona, 2014, entre otros), se han incluido el tamaño de la empresa (TAM) medido como el logaritmo natural del valor libro del total de activos, el nivel de endeudamiento (DPAT), medido como el valor libro de la deuda sobre valor libro del patrimonio; la rentabilidad (ROI), medida como la utilidad operacional sobre valor libro de los activos; el nivel de inversión (CAPEX), medido como gasto de capital sobre valor libro de activos; el uso de dividendos excedentarios (DDIV), medido por medio de una dummy que toma valor 1 si la empresa paga dividendos mayores a 30% de las utilidades y 0 en caso contrario; diversificación industrial (DIVER), medida como la cantidad de sectores industriales en los que la empresa posee ingresos y la concentración de propiedad (PROP1, PROP3 y PROP5), medida por medio del porcentaje de propie- Las dos últimas variables de control utilizadas, volatilidad del flujo de caja (VOLATIL) y exceso de caja (EXCAJA), se han incorporado de manera que se controle la potencial exposición a riesgos, mitigables por medio de derivados, así como sus beneficios.…”

Section: Muestra Variables Y Metodologíaunclassified

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Instrumentos derivados, concentración de propiedad y valor de la firma. Evidencia para Chile

Cid

Bertín

Maquieira³

et al. 2017

El Trimestre

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Background: The use of derivative instruments, as corporate policy to hedge financial risks has a positive impact on the firm value. However, in countries characterized by weak legal protection of the investors' rights and ownership structures highly concentrated, like in Chile, majority shareholders could use this policy to extract wealth from minority shareholders. Methods: Using the Generalized Method of Moments (GMM), this paper analyzes a panel of 133 nonfinancial companies listed on the Santiago de Chile Stock Exchange between 2008 and 2013. Results: The results indicate a positive and statistically significant relationship between the amount of derivatives used and the company value. However, this evidence is conditioned when the majority shareholder (s) keep the control of the company. If the main shareholder or the three major shareholders hold more than 67% of the outstanding shares, then the relationship between the amount of derivatives used and firm value is negative. Conclusion: In analyzing the dynamics between the ownership concentration and the use of derivatives, we findout that when the majority shareholders and the

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Section: Revisión De La Literatura E Hipótesisunclassified

Section: Muestra Variables Y Metodologíaunclassified

Instrumentos derivados, concentración de propiedad y valor de la firma. Evidencia para Chile

Cid

Bertín

Maquieira³

et al. 2017

El Trimestre

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“…In this manner, hundreds of primary studies have empirically investigated the theoretical explanations for corporate hedging. However, despite or perhaps exactly because of the vast amount of studies, the empirical literature presents rather mixed evidence for the drivers of corporate hedging (Aretz and Bartram 2010;Bartram et al 2009;Fauver and Naranjo 2010;Judge 2007).…”

Section: Introductionmentioning

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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“…Companies use different types of hedging strategies like operational hedging, natural hedging, international diversification of business, and so on. The majority of the earlier empirical studies on risk management have used a dichotomous variable that equaled one if a firm used derivatives and zero if it had not (Fauver & Naranjo, 2010;Adam & Fernando, 2006;Gé czy et al, 1997;Nance, 1993;Mian, 1996). As shown in In order to rule out the possible effects of balance sheet control variables on firm value, we followed the extent literature to add a number of control variables to the study.…”

Section: Dependent Variable: Hedgingmentioning

confidence: 99%

Hedge Strategies of Corporate Houses

Nagahi

Nagahisarchoghaei

Soleimani

et al. 2018

JBAR

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This paper compares and contrasts the hedge strategies through derivative instruments by Indian and USA corporate houses. The derivative instruments have little predictive power in explaining corporate hedging strategies both in the USA and Indian firms. The purpose of the study is to provide a setting where reconciling conflicting results from the literature may be appropriate and to compare different hedge strategies in a specific period in two different countries (USA and India). The evidence based on multivariate empirical relations between hedging in American firms and firm's characteristics fails to provide any support for any of the tested hypotheses except for profitability represented by dividend yield. We conclude that the relationship between hedging and dividend yield in the proposed model is negative. The same analysis conducted for Indian companies has shown that there is no statistically significant explanatory variable for hedging; therefore, it is not dependent on any of the predicted theories of hedging. On the other hand, we find some significant relationships between firms' characteristics. Large Indian firms use internal hedge strategies rather than market strategies, such as derivatives. The derivative market development then could play a major role in terms of risk management of firms across countries.

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Derivative usage and firm value: The influence of agency costs and monitoring problems

Cited by 105 publications

References 92 publications

Instrumentos derivados, concentración de propiedad y valor de la firma. Evidencia para Chile

Instrumentos derivados, concentración de propiedad y valor de la firma. Evidencia para Chile

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

Hedge Strategies of Corporate Houses

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