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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
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 | |||||||||||||||
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| Subjects: | H Social Sciences > HG Finance | |||||||||||||||
| Divisions: | Faculty of Social Sciences > Warwick Business School > Accounting Faculty of Social Sciences > Warwick Business School |
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| 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: |
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| 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: |
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