Financial hedging and corporate investment

Alexandridis, George; Chen, Zhong; Zeng, Yeqin

doi:10.1016/j.jcorpfin.2021.101887

Cited by 11 publications

(5 citation statements)

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“…The widespread use of digitization and big data technologies has changed the way information is disseminated, providing enterprises with richer and more accurate market information, but also placing higher demands on enterprises' information processing and decision-making capabilities (Liu & De, 2021). The emergence of blockchain technology has introduced new financial transaction and investment methods, providing companies with new opportunities, but also bringing new risks and challenges (Yang et al, 2020).…”

Section: Introductionmentioning

confidence: 99%

Research on Financial Investment Strategies of Operating Enterprises in the Context of Market Economy

Wei

2023

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In the context of a globalized and digitalized market economy, the role of corporate financial investment has become increasingly crucial. The primary objective of this study is to understand the impact of the market economy on corporate financial investment, reveal its challenges, and propose optimization strategies. We first provide a brief introduction to the concept and fundamental theory of corporate financial investment. Then, using qualitative analysis methods, we explore the impact of the market economy on corporate financial investment. We find that under the backdrop of a market economy, corporate financial investment confronts numerous challenges, such as deficiencies and biases in formulating and implementing investment strategies, challenges of high-risk investment decisions, shortage of financial market knowledge and analytical skills, as well as issues related to adapting to emerging financial technologies. However, by developing optimization strategies like bridging the gap in investment strategy, tackling high-risk investment challenges, enhancing financial market knowledge and analytical abilities, and leveraging financial technology, enterprises can better cope with these challenges and optimize their financial investments. The results of our study offer practical strategies for enterprises to conduct financial investment in a market economy context.

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Section: Introductionmentioning

confidence: 99%

Research on Financial Investment Strategies of Operating Enterprises in the Context of Market Economy

Wei

2023

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“…Consequentemente, tal prática pode reduzir o risco total da companhia, o que diminuiria de seu custo de capital (CHEN; KING, 2014) e facilitaria o acesso a fontes externas de financiamento (LELAND, 1998), repercutindo na aceitação de mais investimentos que criam valor (FROOT; SCHARFSTEIN; STEIN, 1993;ALEXANDRIDS;CHEN;ZENG, 2021). Logo, existiria um "hedging premium", que foi constatado por estudos empíricos nacionais (ROSSI JÚNIOR, 2008; RIBEIRO; MACHADO; ROSSI JÚNIOR, 2013) e internacionais (BARTRAM; BROWN; CONRAD, 2011).…”

Section: Introductionunclassified

Derivativos, Valor Da Firma E Governança Corporativa No Brasil

Caixe,

Rodrigues

2022

REAd. Rev. eletrôn. adm. (Porto Alegre)

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RESUMO Este estudo investiga a influência da governança corporativa na relação entre o uso de derivativos financeiros e o valor da firma no contexto brasileiro. Nós usamos dados longitudinais de 241 companhias abertas ao longo do período de 2006 a 2017. As empresas são divididas em dois grupos: com melhor governança (listadas nos segmentos prêmios da B3 - Nível 1, Nível 2 e Novo Mercado); e com pior governança (listadas no segmento Tradicional da B3). Quando mitigados possíveis problemas de endogeneidade pelo Método dos Momentos Generalizado Sistêmico, os resultados indicam que o emprego de swaps diminui o valor das firmas bem governadas que são menos endividadas. Nós interpretamos tais achados como uma evidência de que o “prêmio de governança corporativa” é reduzido (ou eliminado) pelo uso de derivativos, quando o mercado brasileiro acredita que esses instrumentos são utilizados para especulação ou benefício dos gestores.

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“…Global directions have made financial markets more unpredictable. This uncertainty is affected by adverse changes in interest rates, commodities and foreign currency (Fatemi and Luft, 2002;Choi et al, 2020;Alexandridis et al, 2021;Chen, 2021). This condition necessitates using risk management strategies that stabilize firm cash flows.…”

Section: Introductionmentioning

confidence: 99%

“…This uncertainty is affected by adverse changes in interest rates, commodities and foreign currency (Fatemi and Luft, 2002; Choi et al. , 2020; Alexandridis et al. , 2021; Chen, 2021).…”

Section: Introductionmentioning

confidence: 99%

Corporate derivatives use and firm value: conditional role of corporate governance

Butt

Rizavi

Nazir

et al. 2022

SAJBS

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PurposeThis study aims to examine the effect of corporate derivatives use on firm value and how the corporate governance index modifies this relationship.Design/methodology/approachThe sample consists of 219 nonfinancial firms on the Pakistan Stock Exchange (PSX) from 2011 to 2019. The study used ordinary least square regression with year and industry dummies for estimations. Multiple estimation models such as fixed/random effect, Fama–MacBeth and two-stage least squares (2SLS) are used for robustness. Finally, the PROCESS macro tool is used to estimate the effect of moderating the role of corporate governance (CG) as robustness.FindingsThe findings show that derivatives use has an inverse influence on firm value. The firms did not use derivatives as a risk management tool but for speculation motives. However, the corporate governance index significantly weakens this relationship. However, strong governance forces the managers to use derivatives for hedging purposes. The firm-specific factors, including size, age, leverage, cash, financial distress cost, dividend and growth opportunities, also significantly influence firm value. The findings are robust to the other estimation models.Research limitations/implicationsThe findings indicate that emerging economies like Pakistan are more prone to agency problems. The strong corporate governance structure helps firms turn the speculative motive of derivatives use into hedging purposes and mitigate the agency issues.Practical implicationsThis empirical evidence suggests that good governance structures can help improve the impact of derivative usage on firm value.Originality/valueTo the best of the author's knowledge, this is the first study that examines the conditional role of corporate governance on the derivatives–value relationship from the viewpoint of agency problem/speculative motive.

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Financial hedging and corporate investment

Cited by 11 publications

References 168 publications

Research on Financial Investment Strategies of Operating Enterprises in the Context of Market Economy

Research on Financial Investment Strategies of Operating Enterprises in the Context of Market Economy

Derivativos, Valor Da Firma E Governança Corporativa No Brasil

Corporate derivatives use and firm value: conditional role of corporate governance

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