Financial Hedging and Firm Performance: Evidence from Crossâ€ border Mergers and Acquisitions
Bo Han and
European Financial Management, 2017, vol. 23, issue 3, 415-458
Using a sample of 1,369 crossâ€ border acquisitions announced by Standard & Poor's 1500 firms between 2000 and 2014, we find strong evidence that derivatives users experience higher announcement returns than nonâ€ users, which translates into a US$ 193.7 million shareholder gain for an averageâ€ sized acquirer. In addition, we find that acquirers with hedging programmes have higher deal completion probabilities, longer deal completion times, and better longâ€ term postâ€ deal performance. We confirm our findings after employing an extensive array of models to address potential endogeneity. Overall, our results provide new insights into a link between corporate financial hedging and firm performance.
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