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Corporate hedging and speculation with derivatives
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Bartram, Söhnke M. (2019) Corporate hedging and speculation with derivatives. Journal of Corporate Finance, 57 . pp. 9-34. doi:10.1016/j.jcorpfin.2017.09.023 ISSN 0929-1199.
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Official URL: https://doi.org/10.1016/j.jcorpfin.2017.09.023
Abstract
Against the backdrop of the role of derivatives in the recent financial crisis, this paper investigates the effect of derivatives usage on the risk and exposure of nonfinancial firms around the world, and presents evidence that they use derivatives for hedging purposes. There is no evidence of corporate speculation with derivatives for firms in individual countries or for different types of derivatives, except for marginally higher net commodity price exposure of firms using commodity price derivatives. Firms use derivatives for hedging purposes independent of access to derivatives or country-level corporate governance. While there are no differences in risk between firms in countries with strong and weak shareholder rights, the reduction in risk is larger for firms in countries where creditor rights are weak or where derivatives are readily available. Consequently, policy makers could facilitate corporate hedging activities by pursuing strategies that encourage the development of local-currency derivatives markets. Given the similarity in the use and effect of derivatives across countries, internationally harmonized regulation of derivatives markets may be adequate.
Item Type: | Journal Article | ||||||||||||
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Subjects: | H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management H Social Sciences > HG Finance |
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Divisions: | Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
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Library of Congress Subject Headings (LCSH): | Derivative securities , Risk management, Hedging (Finance), Speculation , Corporations--Finance, International finance, Corporate governance | ||||||||||||
Journal or Publication Title: | Journal of Corporate Finance | ||||||||||||
Publisher: | Elsevier Science BV | ||||||||||||
ISSN: | 0929-1199 | ||||||||||||
Official Date: | August 2019 | ||||||||||||
Dates: |
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Volume: | 57 | ||||||||||||
Page Range: | pp. 9-34 | ||||||||||||
DOI: | 10.1016/j.jcorpfin.2017.09.023 | ||||||||||||
Status: | Peer Reviewed | ||||||||||||
Publication Status: | Published | ||||||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||||||
Date of first compliant deposit: | 26 September 2017 | ||||||||||||
Date of first compliant Open Access: | 29 March 2019 | ||||||||||||
RIOXX Funder/Project Grant: |
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