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The Value of Foreign Currency Hedging: A study on the German market

Bielmeier, Thomas and Hansson Nansing, Christian LU (2013) BUSN89 20131
Department of Business Administration
Abstract
This study examines the use of derivatives by 137 public firms in Germany in 2006-2010. To our knowledge our study is the first examination of the relation between hedging and market value on the German market. We find in univariate tests that the use of derivatives by non-financial firms does not add value. The results from our tests are inconsistent with theoretical predictions. Additionally our multivariate tests turn out to be inconsistent compared to the reported significant results within the documented U.S. sample examination as regards a value-enhancing effect imposed by derivatives. We identify influence factors in the areas of corporate governance, internationalization and managerial ability as a possible explanation for... (More)
This study examines the use of derivatives by 137 public firms in Germany in 2006-2010. To our knowledge our study is the first examination of the relation between hedging and market value on the German market. We find in univariate tests that the use of derivatives by non-financial firms does not add value. The results from our tests are inconsistent with theoretical predictions. Additionally our multivariate tests turn out to be inconsistent compared to the reported significant results within the documented U.S. sample examination as regards a value-enhancing effect imposed by derivatives. We identify influence factors in the areas of corporate governance, internationalization and managerial ability as a possible explanation for country-specific differences between firms in Germany and the U.S. (Less)
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author
Bielmeier, Thomas and Hansson Nansing, Christian LU
supervisor
organization
course
BUSN89 20131
year
type
H1 - Master's Degree (One Year)
subject
keywords
Firm value, Hedging, Currency derivatives, Volatility
language
English
id
3955196
date added to LUP
2013-07-31 09:08:35
date last changed
2013-07-31 09:08:35
@misc{3955196,
  abstract     = {This study examines the use of derivatives by 137 public firms in Germany in 2006-2010. To our knowledge our study is the first examination of the relation between hedging and market value on the German market. We find in univariate tests that the use of derivatives by non-financial firms does not add value. The results from our tests are inconsistent with theoretical predictions. Additionally our multivariate tests turn out to be inconsistent compared to the reported significant results within the documented U.S. sample examination as regards a value-enhancing effect imposed by derivatives. We identify influence factors in the areas of corporate governance, internationalization and managerial ability as a possible explanation for country-specific differences between firms in Germany and the U.S.},
  author       = {Bielmeier, Thomas and Hansson Nansing, Christian},
  keyword      = {Firm value,Hedging,Currency derivatives,Volatility},
  language     = {eng},
  note         = {Student Paper},
  title        = {The Value of Foreign Currency Hedging: A study on the German market},
  year         = {2013},
}