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Does corporate hedging enhance shareholder value? A meta-analysis

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Bessler, Wolfgang, Conlon, Thomas and Huan, Xing (2019) Does corporate hedging enhance shareholder value? A meta-analysis. International Review of Financial Analysis, 61 . pp. 222-232. doi:10.1016/j.irfa.2018.11.010

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Official URL: http://dx.doi.org/10.1016/j.irfa.2018.11.010

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Abstract

The theories underpinning corporate use of derivatives are well developed. Furthermore, there exist compelling economic reasons why hedging should lead to enhanced shareholder value, but empirical evidence in support of a substantial value increase from hedging is, at best, mixed. In this paper, we synthesize the empirical evidence for value enhancement in firms’ hedging with derivatives using a statistical meta-analysis combining data from 47 different studies. Our findings indicate that firms’ hedging with derivatives have larger Tobin’s Q, a commonly used measure of value creation. A variety of moderating variables are assessed, providing evidence of heterogeneity in the value relevance of corporate hedging. In particular, we find that relatively higher firm value is primarily associated with hedging of foreign exchange risk.

Item Type: Journal Article
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences > Warwick Business School > Accounting
Faculty of Social Sciences > Warwick Business School
Library of Congress Subject Headings (LCSH): Derivative securities, Hedging (Finance), Corporations, Stockholders
Journal or Publication Title: International Review of Financial Analysis
Publisher: Elsevier BV
ISSN: 1057-5219
Official Date: January 2019
Dates:
DateEvent
January 2019Published
30 November 2018Available
27 November 2018Accepted
Volume: 61
Page Range: pp. 222-232
DOI: 10.1016/j.irfa.2018.11.010
Status: Peer Reviewed
Publication Status: Published
Access rights to Published version: Restricted or Subscription Access
RIOXX Funder/Project Grant:
Project/Grant IDRIOXX Funder NameFunder ID
16/SPP/33 Science Foundation Irelandhttp://dx.doi.org/10.13039/501100001602
13/RC/2106Science Foundation Irelandhttp://dx.doi.org/10.13039/501100001602
17/SP/5447Science Foundation Irelandhttp://dx.doi.org/10.13039/501100001602
REPRO/2015/109Irish Research Councilhttp://dx.doi.org/10.13039/501100002081

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