Corporate derivatives use policy and information environment

J. Barry Lin (), Christos Pantzalis () and Jung Chul Park ()
Additional contact information
J. Barry Lin: Khalifa University
Christos Pantzalis: University of South Florida
Jung Chul Park: University of South Florida

Review of Quantitative Finance and Accounting, 2017, vol. 49, issue 1, No 6, 159-194

Abstract: Abstract We provide evidence consistent with the notion that prudent use of financial derivatives improves firms’ information environment. We show that firms with sophisticated and comprehensive derivatives use policies display lower levels of uncertainty about future cash flows, volatility of future income and sales growth, and equity mispricing than those that do not use derivatives. However, we also show that policies that consist of large positions in a single type of derivative contract are not likely to produce similar benefits. These results remain intact even after accounting for the endogenous nature of derivatives use policy and information risk and mispricing.

Keywords: Financial risk management; Information uncertainty; Mispricing (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s11156-016-0586-9

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