EconPapers    
Economics at your fingertips  
 

Foreign currency risk hedging and firm value in China

Robin Hang Luo and Rui Wang

Journal of Multinational Financial Management, 2018, vol. 47-48, 129-143

Abstract: The objective of our study is to investigate the association between the use of foreign currency derivatives and corporate value among Chinese firms by examining listed firms’ quarterly data from 2000 to 2013. We find that Chinese firms that engage in hedging activities with derivatives to reduce their foreign exchange exposure tend to have higher corporate value. This finding is shown to be consistent through a series of robustness tests. We also find that the incidence of such effects is higher among firms with greater profitability and investment opportunities. The use of foreign currency derivatives exerts a more prominent impact on firm value when the exchange rate depreciates and when the economy is booming. However, the link between derivative use and firm value is weaker during crisis periods. Moreover, an industrial analysis demonstrates that the value-enhancing effect varies across industries.

Keywords: Derivatives; Exchange rate; Firm value; Hedging; Value-enhancing effect; China (search for similar items in EconPapers)
JEL-codes: F31 G32 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1042444X18301622
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:mulfin:v:47-48:y:2018:i::p:129-143

Access Statistics for this article

Journal of Multinational Financial Management is currently edited by I. Mathur and G. G. Booth

More articles in Journal of Multinational Financial Management from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-04-21
Handle: RePEc:eee:mulfin:v:47-48:y:2018:i::p:129-143