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The Association Between Firm Characteristics and the Use of a Comprehensive Corporate Hedging Strategy: An Ordered Probit Analysis

Hue Hwa Au Yong, Robert Faff,Hoa Nguyen ()
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Hue Hwa Au Yong, Robert Faff,Hoa Nguyen: University of Queensland, Australia

Authors registered in the RePEc Author Service: Robert William Faff and Hue Hwa Au Yong

Frontiers in Finance and Economics, 2011, vol. 8, issue 1, 1-16

Abstract: We investigate the potential factors that influence the corporate decision to collectively use foreign currency; interest rate; and commodity derivatives and foreign debt. Our Australian results show that firm size (‘scale economies’ hypothesis); leverage (‘financial distress cost’ hypothesis); and block holdings are positively associated with the comprehensive hedging decision, while executive shareholdings has a negative association. However, we do not find any support for the underinvestment or managerial risk aversion hypotheses.

Keywords: derivative use; coordinated corporate hedging strategy; ordered probit analysis (search for similar items in EconPapers)
JEL-codes: G30 G32 (search for similar items in EconPapers)
Date: 2011
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