Determinants of corporate hedging and derivatives: A revisit

Fok, Robert C.W.; Carroll, Carolyn; Chiou, Ming C.

doi:10.1016/s0148-6195(97)00040-4

Cited by 93 publications

(116 citation statements)

References 35 publications

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“…However, if managers are also given share options their wealth function becomes convex because of the convex payoff structure of options. Previous studies such as Whidbee and Wohar (1999) and Fok, Carroll and Chiou (1997) found that managerial and institutional ownership structure has significant influence on the corporate hedging decisions. We argue that in the developing countries such as Malaysia, the effect of ownership structure would be unique compared to the developed markets such as the U.S because of less dispersed ownership and poor portfolio risk diversification of managers.…”

Section: H6-there Is a Positive Relationship Between Tax Losses And Dmentioning

confidence: 90%

“…Second, notional amounts or gross value of derivatives has been to explain the amount of derivatives used by the firms in a linear regression framework (see e.g., Singh and Upneja, 2007;Fok et al, 1997). The main objective of this paper is to examine the determinants of foreign currency and interest rate derivatives for which second approach seems more appropriate.…”

Section: Methodsmentioning

confidence: 99%

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Determinants of Corporate Hedging Practices in Malaysia

Ameer¹

2010

IBR

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This paper examines the impact of the firm specific factors on the use of derivative instruments for Malaysia firms. We find that there is a significant relationship between the use of derivatives and foreign sales, liquidity, firm growth, managerial ownership and size. Our findings suggest that only a few listed Malaysian firms have appropriate understanding of the derivatives instruments to mitigate risks in international business environment. Most Malaysian managers seem to be risk averse and do not understand the upside of taking position in the derivatives markets.

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Section: H6-there Is a Positive Relationship Between Tax Losses And Dmentioning

confidence: 90%

Section: Methodsmentioning

confidence: 99%

Determinants of Corporate Hedging Practices in Malaysia

Ameer¹

2010

IBR

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“…Otros estudios han tratado de analizar si la deuda actúa como instrumento de cobertura complementario o sustitutivo al uso de productos derivados. Los resultados obtenidos no son concluyentes ya que Fok et al (1997), Bartram et al (2003), Hagelin y Pramborg (2004), Muller y Verschoor (2005), y Otero et al (2005) encuentran una relación de complementariedad, mientras que los trabajos de Allayannis y Ofek (2001), Elliot et al (2003), Judge (2003), y Aabo (2006) obtuvieron una relación signifi cativa pero de signo negativo que apoya la hipótesis de sustitución.…”

Section: Cuadro 10 (Cont) Síntesis De Resultados De Las Estimacionesunclassified

“…Dicho resultado puede signifi car tanto que la deuda en divisa es una fuente de riesgo cambiario, lo que implica que los derivados se usan para cubrir dicha exposición, como que es un instrumento de cobertura, que implica una relación de complementariedad con los derivados en la cobertura. Dado que en el análisis previo hemos comprobado que la deuda en divisa actúa como instrumento de cobertura cambiaria, concluimos que se apoya la hipótesis de complementariedad entre el uso de deuda en divisa y el uso de productos derivados, en línea con los resultados obtenidos por Fok et al (1997), Bartram et al (2003), Hagelin y Pramborg (2004), Muller y Verschoor (2005) y Otero et al (2007. Notas: el Cuadro 12 recoge las estimaciones Tobit de la relación entre el porcentaje de derivados en divisas y las variables independientes indicadas.…”

Section: Cuadro 10 (Cont) Síntesis De Resultados De Las Estimacionesunclassified

“…Las empresas más afectadas por el problema de subinversión son aquellas con más oportunidades de crecimiento. En este trabajo se utilizan como proxies de las oportunidades de crecimiento el ratio de activos intangibles respecto a activos totales [actintangibles], y el valor de mercado en relación al valor en libros [market to book] (Fok et al, 1997;Geczy et al, 1996;Mian, 1996;Nance et al, 1993), esperando una relación positiva entre ambos y el uso de productos derivados en divisa.…”

Section: Cuadro 1 (Cont) Variables E Hipótesis Consideradas En El Esunclassified

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Determinantes de la cobertura del riesgo de cambio con productos derivados: evidencia para el mercado español

González

Búa

López

et al. 2008

Spanish Journal of Finance and Accounting / Revista Española de

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RESUMEN Este trabajo analiza los factores que determinan el uso de productos derivados para la cobertura del riesgo cambiario en el mercado de capitales español. La investigación se centra en las razones aportadas desde las teorías de la cobertura óptima, diferenciando entre aquellas que se refi eren a las imperfecciones de los mercados fi nancieros, a factores propios de la exposición cambiaria y a elementos de coste. A través de modelos de regresión binaria multivariante se ha encontrado que los factores que impulsan a las empresas españolas a cubrirse del riesgo de cambio son las economías de escala, los costes de insolvencia, las asimetrías informativas y los problemas de subinversión. Asimismo, se ha obtenido que en la determinación de la cuantía de la cobertura infl uye, principalmente, el nivel de riesgo asumido y en menor medida el benefi cio empresarial, la rentabilidad económica y el porcentaje de capital en manos del directivo. Finalmente, se ha comprobado como la deuda en divisa se utiliza con ánimo de cobertura y actúa como instrumento complementario del uso de productos derivados.PALABRAS CLAVE Productos derivados; Gestión del riesgo; Riesgo de cambio; Probit; Tobit.ABSTRACT The present paper analyses the reasons why publicly traded Spanish fi rms use derivatives to hedge against exchange-rate risk. The research focuses on the reasons that can be justifi ed based on the theory of optimal hedging. The results have been obtained using multivariate binary regression models and they suggest that companies use derivatives because of factors related with economies of scale, asymmetric information and underinvestment problems, and bankruptcy costs. With regarding to the hedging volume, the main variable that determines the volume of hedging is the level of exchange exposition. Finally in the analysis of foreign currency debt, we found that companies use it as a complementary hedging instrument.

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Who hedges more when leverage is endogenous? A testable theory of corporate risk management under general distributional conditions

Hahnenstein¹,

Röder

2007

Rev Quant Finan Acc

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This paper develops a theory of a firm’s hedging decision with endogenous leverage. In contrast to previous models in the literature, our framework is based on less restrictive distributional assumptions and allows a closed-form analytical solution to the joint optimization problem. Using anecdotal evidence of greater benefits of risk management for firms selling “credence goods” or products that involve long-term relationships, we prove that those optimally leveraged firms, which face more convex indirect bankruptcy cost functions, will choose higher hedge ratios. Moreover, we suggest a new approach to test this relationship empirically. Copyright Springer Science+Business Media, LLC 2007Corporate hedging, Risk management, Leverage, Capital structure, Bankruptcy, Financial distress, G32, G39,

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Determinants of corporate hedging and derivatives: A revisit

Cited by 93 publications

References 35 publications

Determinants of Corporate Hedging Practices in Malaysia

Determinants of Corporate Hedging Practices in Malaysia

Determinantes de la cobertura del riesgo de cambio con productos derivados: evidencia para el mercado español

Who hedges more when leverage is endogenous? A testable theory of corporate risk management under general distributional conditions

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