Economics at your fingertips  

Does corporate hedging affect firm valuation? Evidence from the IPO market

Zheng Qiao, Chongwu Xia and Lei Zhang

Journal of Futures Markets, 2020, vol. 40, issue 6, 895-927

Abstract: Focusing on the IPO market, we examine the influence of corporate hedging on firm valuation. Consistent with the argument that hedging reduces information asymmetry, we find that hedging IPO firms are associated with lower price revisions and underwriting fees. More important, hedging reduces IPO underpricing, especially for informationally opaque firms. This provides strong evidence that corporate hedging increases firm valuation. We also show that corporate hedging lowers aftermarket idiosyncratic volatility, enhances aftermarket liquidity, and improves the long‐term performance of IPO firms. We use both an instrumental variable approach and a regulation change on derivatives supply to address endogeneity concerns.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)

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:

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314

Access Statistics for this article

Journal of Futures Markets is currently edited by Robert I. Webb

More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2020-05-16
Handle: RePEc:wly:jfutmk:v:40:y:2020:i:6:p:895-927