Do investors really value derivatives use? Empirical evidence from France

Karim Ben Khediri

Journal of Risk Finance, 2010, vol. 11, issue 1, 62-74

Abstract: Purpose - The purpose of this paper is to examine the valuation effect of derivatives use in the French market using a sample of 250 non‐financial firms over the period 2000‐2002. Design/methodology/approach - The approach taken is application of linear regression framework and panel data techniques. Findings - The paper finds that the decision to use derivatives has no effect on firm valuation. However, the extent of derivatives use is associated with lower firm value. Hence, it seems that French investors do not assign a premium value to derivatives use. Practical implications - The findings imply that managers should explain to investors that firms truly use derivatives for hedging purposes and how such a financial policy creates shareholders value. Originality/value - It is believed that this is the first study that examines the valuation effect of derivatives use in France.

Keywords: Derivative markets; France; Hedging; Risk management; Investors (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jrfpps:15265941011012688

DOI: 10.1108/15265941011012688

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