Derivative Initiative: Does the Use of Financial Derivatives Influence Firm Value in the Philippine Context?

Added Title

DLSU-AKI Policy Brief, Volume VII, No. 7

Authors

Julia Alfonso D. Arrastia, De La Salle University, Manila
Christina Angela N. Balagot, De La Salle University, Manila
Joseph Anthony C. Go, De La Salle University, Manila
Dominique Ann Philomena V. Lacuna, De La Salle University, Manila

Document Type

Policy Brief

Publication Date

10-2020

Place of Publication

DLSU-Angelo King Institute, Room 223, LS building, 2401 Taft Avenue, Manila 0922

Abstract

Firms use financial derivatives as a way to hedge risky transactions to avoid financial risks. Studies have focused on firms’ use of financial derivatives in developed countries. However, there is limited research done on emerging markets like the Philippines because these economies have only recently adapted advanced reporting standards that obligate the disclosure of the nature and extent of risks resulting from the use of financial instruments. We used Tobin’s Q ratio to proxy for firm value and determine the presence of a hedging premium. Because derivatives are used by firms to hedge against currency risks, interest rate risks, and commodity price risks, we hypothesize that the use of financial derivatives by firms has a positive and statistically significant effect on firm value.

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Recommended Citation

Arrastia, J. D., Balagot, C. N., Go, J. C., & Lacuna, D. V. (2020). Derivative Initiative: Does the Use of Financial Derivatives Influence Firm Value in the Philippine Context?. Retrieved from https://animorepository.dlsu.edu.ph/res_aki/119

Disciplines

Finance and Financial Management

Keywords

derivatives; hedging; risk management; firm value

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