The wealth effect of swap usage in the food processing industry

Jian Yang (), David Leatham () and Spencer A. Case
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Spencer A. Case: Texas A&M University, Postal: Texas A&M University

Agribusiness, 2000, vol. 16, issue 3, 367-379

Abstract: U.S. companies use interest rate swaps more than any other financial derivative. The effect of swap usage on the shareholders' wealth is both controversial and unclear. Using a sample from the food processing industry, we examined both short-run and long-run wealth effects associated with swap usage. A significant long-run wealth effect of swap usage on swap users was not found. However, there was a significant negative wealth effect during a short period before firms first disclosed swap usage to the SEC. This finding is consistent with the argument that derivative usage may not be in the best interest of shareholders. © 2000 John Wiley & Sons, Inc.

Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:wly:agribz:v:16:y:2000:i:3:p:367-379

DOI: 10.1002/1520-6297(200022)16:3<367::AID-AGR8>3.0.CO;2-4

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