Corporate hedging and shareholder value

Kevin Aretz, Söhnke M. Bartram

Research output: Contribution to journalArticlepeer-review

Abstract

Although theory suggests that corporate hedging can increase shareholder value in the presence of capital market imperfections, empirical studies show overall mixed support for rationales of hedging with derivatives. Although various empirical challenges and limitations advise some caution with regard to the interpretation of the existing evidence, the results are consistent with derivatives use being just one part of a broader financial strategy that considers the type and level of financial risks, the availability of risk management tools, and the operating environment of the firm. Moreover, corporations rely heavily on pass-through, operational hedging, and foreign currency debt to manage financial risk. © 2010 The Southern Finance Association and the Southwestern Finance Association.
Original languageEnglish
Pages (from-to)317-371
Number of pages54
JournalJournal of Financial Research
Volume33
Issue number4
DOIs
Publication statusPublished - Dec 2010

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