The Effects of Derivatives on Firm Risk and Value
Söhnke Bartram,
Gregory W. Brown and
Jennifer Conrad
MPRA Paper from University Library of Munich, Germany
Abstract:
Using a sample of 6,888 non-financial firms from 47 countries, we examine the effect of derivative use on firms’ risk measures and value. We control for endogeneity by matching users and non-users on the basis of their propensity to hedge. We also use a new technique to estimate the effect of omitted variable bias on our inferences. We find strong evidence that the use of financial derivatives reduces both total risk and systematic risk. The effect of derivative use on firm value is positive but weak, and is more sensitive to endogeneity and omitted variable concerns. This increased sensitivity could account for the mixed evidence in the literature on the effect of hedging on firm value.
Keywords: Derivatives; risk management; hedging; international finance (search for similar items in EconPapers)
JEL-codes: F3 F4 G3 (search for similar items in EconPapers)
Date: 2006-10-01, Revised 2008-07-24
New Economics Papers: this item is included in nep-bec, nep-fmk and nep-rmg
References: Add references at CitEc
Citations: View citations in EconPapers (10)
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/9831/1/MPRA_paper_9831.pdf original version (application/pdf)
Related works:
Journal Article: The Effects of Derivatives on Firm Risk and Value (2011) 
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:pra:mprapa:9831
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().