Does Corporate Derivative Use Reduce Stock Price Exposure? Evidence From UK Firms

Pinghsun Huang, M. Humayun Kabir, Yan Zhang

研究成果: Article同行評審

2 引文 斯高帕斯(Scopus)

摘要

This paper explores the potential impacts of corporate derivatives use on stock return volatility and market risk. Using a sample of more than 3000 firm-years in the United Kingdom between 2003 and 2009, we find that a firm's derivatives use is instrumental in reducing its standard deviation of weekly stock returns and systematic risk. This phenomenon is particularly pronounced for firms with foreign currency or interest rate derivatives. Further, we find that the adverse effects of corporate derivatives use on equity return volatility and market risk were significantly greater during the financial crisis of 2007–2009 when firms, on average, were more susceptible to stock price exposures. Ancillary analyses suggest that firms that use foreign currency along with interest rate derivatives benefit from an additional reduction in the volatility of stock returns and systematic risk. These results are robust to numerous controls, including firm size, diversification effects, financial leverage, growth opportunity, industry attributes, self-selection biases, foreign sales, and macroeconomic effects. As a whole, our findings suggest that firms are more likely to use financial derivatives for risk management than for trading purposes.

原文English
頁(從 - 到)128-136
頁數9
期刊Quarterly Review of Economics and Finance
65
DOIs
出版狀態Published - 2017 八月

All Science Journal Classification (ASJC) codes

  • 金融
  • 經濟學與計量經濟學

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