Commodity Derivative Effect On Firm Value During COVID-19 - Evidence From Nordic Firms
(2024) BUSN79 20241Department of Business Administration
- Abstract
- Advisor: Elias Bengtsson
Purpose: To investigate the effect of commodity price hedging activities had on firm value during the COVID-19 Crisis.
Theoretical Perspective: The foundation of this study is built upon the significant theories of Perfect Market Theory, Information Asymmetry, Agency Cost, Risk Shifting, and the emerging concept of ESG.
Methodology: The paper utilizes a Two-Way Fixed Effects Difference-in-Difference regression methodology. The regression uses Tobin’s Q as the dependent variable. The main independent variables in the regression are commodity hedging activity and ESG score. Control variables include Total Debt, Capital Expenditure, Current Ratio, Research and Development Cost, Debt to Equity, Solidity, Cash... (More) - Advisor: Elias Bengtsson
Purpose: To investigate the effect of commodity price hedging activities had on firm value during the COVID-19 Crisis.
Theoretical Perspective: The foundation of this study is built upon the significant theories of Perfect Market Theory, Information Asymmetry, Agency Cost, Risk Shifting, and the emerging concept of ESG.
Methodology: The paper utilizes a Two-Way Fixed Effects Difference-in-Difference regression methodology. The regression uses Tobin’s Q as the dependent variable. The main independent variables in the regression are commodity hedging activity and ESG score. Control variables include Total Debt, Capital Expenditure, Current Ratio, Research and Development Cost, Debt to Equity, Solidity, Cash Ratio, and Return On Invested Capital. Interaction terms are also included, reflecting the partial effect of Hedging*Leverage, Hedging*Size, and Hedging*Liquidity.
Empirical foundation: The study contains 1,322 firms across the years 2014-2023. Out of these, 107 are attributed to the treatment group and 1,215 to the control group. The total number of observations, at 13,220, will consequently drop to 6,520 and 1,522 as control variables are included in the regression.
Conclusions: The study finds that using commodity hedging derivatives will have a 0.03 positive effect on Tobin’s Q score. It furthermore finds that firm-specific qualities such as leverage, size, and liquidity have a partial effect on this relationship. Lastly, the paper finds no evidence that ESG scores could be used as a hedging strategy. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9170166
- author
- Sildre, Johannes LU and Benilsson, Noah LU
- supervisor
- organization
- course
- BUSN79 20241
- year
- 2024
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Commodity hedging, Tobin’s Q, Firm value, Nordics, ESG
- language
- English
- id
- 9170166
- date added to LUP
- 2024-08-07 16:46:26
- date last changed
- 2024-08-07 16:46:26
@misc{9170166,
abstract = {{Advisor: Elias Bengtsson
Purpose: To investigate the effect of commodity price hedging activities had on firm value during the COVID-19 Crisis.
Theoretical Perspective: The foundation of this study is built upon the significant theories of Perfect Market Theory, Information Asymmetry, Agency Cost, Risk Shifting, and the emerging concept of ESG.
Methodology: The paper utilizes a Two-Way Fixed Effects Difference-in-Difference regression methodology. The regression uses Tobin’s Q as the dependent variable. The main independent variables in the regression are commodity hedging activity and ESG score. Control variables include Total Debt, Capital Expenditure, Current Ratio, Research and Development Cost, Debt to Equity, Solidity, Cash Ratio, and Return On Invested Capital. Interaction terms are also included, reflecting the partial effect of Hedging*Leverage, Hedging*Size, and Hedging*Liquidity.
Empirical foundation: The study contains 1,322 firms across the years 2014-2023. Out of these, 107 are attributed to the treatment group and 1,215 to the control group. The total number of observations, at 13,220, will consequently drop to 6,520 and 1,522 as control variables are included in the regression.
Conclusions: The study finds that using commodity hedging derivatives will have a 0.03 positive effect on Tobin’s Q score. It furthermore finds that firm-specific qualities such as leverage, size, and liquidity have a partial effect on this relationship. Lastly, the paper finds no evidence that ESG scores could be used as a hedging strategy.}},
author = {{Sildre, Johannes and Benilsson, Noah}},
language = {{eng}},
note = {{Student Paper}},
title = {{Commodity Derivative Effect On Firm Value During COVID-19 - Evidence From Nordic Firms}},
year = {{2024}},
}