Hedging and firm value: is there a link?
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2022-07-18
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en
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Abstract
This paper investigates the relationship between firm value and hedging on a panel of companies composing the S&P 500 INDEX from 2010 to 2021. Abundant, contradicting literature has so far investigated the issue, without coming to a common conclusion. In this paper, I extend the body of existing evidence by not only checking the direct and indirect effect of hedging on firm’s value on a broad, new panel, but also by considering 5 different value measures and standardized variants of both Hedging and Cash flow volatility. Despite the diversity of dependent and independent variables, no link between derivatives usage and firm’s value can be identified. This result is consistent with the theory of Modigliani and Miller (1958), affirming that corporate risk management should add no value to the firm.
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Faculteit der Managementwetenschappen