MITIGATING FINANCIAL RISK BY USING HEDGING STRATEGIES

Anca Butnariu, Florin-Alexandru Luca and Andreea Apetrei
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Anca Butnariu: „Gheorghe Asachi” Technical University of Iasi
Andreea Apetrei: Catholic University of Valencia

SEA - Practical Application of Science, 2018, issue 16, 75-79

Abstract: Financial derivatives are now widely used by corporations to manage exposure to currency, interest rate, and commodity price risks. The motivation for non-financial firms to engage in corporate hedging is one of the most intensively discussed topics in corporate finance research. Recent financial theory suggests that there are several ways through which corporate hedging can increase firm value in the sense of the maximization of shareholder value. A rich body of literature consists of studies that have empirically investigated the theoretical explanations for corporate hedging, literature that presents rather mixed evidence for the drivers of corporate hedging. This paper investigates the effects of hedging activity on non-financial firm value and how operational hedging is related to and differentiated by financial hedging, by providing an extensive overview and synthesis of the existing literature.

Keywords: Financial risk management; Financial hedging; Operational hedging (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:cmj:seapas:y:2018:i:16:p:75-79

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