Hedging Effectiveness in Energy Market during Economic Crisis: Better Way to Integration

Abstract

This paper investigates hedging and risk management options in the energy sector. Energy firms tend to adopt risk management tools in order to cover their financial exposure. Taking into consideration that current crisis has a significant effect on their value; we check whether energy firms actually have better output when they use hedging tools. In order to measure the effectiveness of this strategy in the energy industry, we adopt Tobin's Q methodology. The sample of this study consists energy firms on a worldwide basis. The empirical evidence of this research confirms that energy firms may avoid huge economic problems when they adopt risk management methods. It is better enery market integration.• JEL Classification: G14, G15

Hedging effectiveness in EU energy market: A case study

“…The empirical results from the econometric analysis using panel data demonstrate a statistically significant relationship between the value of derivative financial products used by electricity-producing companies in the EU-27 (as a percentage of their total assets) and the financial value of these companies, as expressed through the Tobin's Q ratio. This finding aligns with previous research by Samitas et al (2011) that examined the impact of hedging strategies in 50 electric power producing companies (internationally) during the financial crisis 2007 -2009.…”

“…In addition, there is a positive effect on the value of the companies through the hedging of interest rate risk, while at the same time there is no statistically significant evidence for the effect of hedging of primary commodity prices. Samitas, Tsakalos, and Eriotis (2011) focus on investigating the extent of the effect of the aforementioned strategies during the recent financial crisis (2007)(2008)(2009) by studying 50 companies operating in the energy sector globally (analyzing panel data).…”

“…• Dependent Variable (Y): The firms' value is measured using the Tobin's Q index. In literature there are many different definitions of Tobin's Q; indicatively (Panaretou, 2014;Samitas et al, 2011). In the present study we adopt the Market Value to Book value (MV/BV) approach, also used by Samitas et al (2011).…”

Penggunaan Hedging oleh Perusahaan Telekomunikasi yang Tercatat Pada Bursa Efek Indonesia

“…Adanya hubungan yang kuat antara hedging derivative dengan sales, likuiditas, pertumbuhan option, growth options, managerial ownership dan besarnya perusahaan di Malaysia (Ameer, 2010). Penggunaan produk derivatif berpengaruh signifikan positif terhadap nilai keuangan perusahaan (Samitas et al 2011). Penggunaan hedging menciptakan value bagi pemilik saham (Scordis et al 2012).…”