Hedging Season: The Effect of Hedging Using Financial Derivatives on Firm Value of Publicly-Listed Non-Financial Firms in the Philippines

Added Title

DLSU-AKI Working Paper Series 2020-10-061

Authors

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

College

School of Economics

Department/Unit

Economics

Document Type

Working Paper

Publication Date

10-2020

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 to 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., & Lacuna, D. V. (2020). Hedging Season: The Effect of Hedging Using Financial Derivatives on Firm Value of Publicly-Listed Non-Financial Firms in the Philippines. Retrieved from https://animorepository.dlsu.edu.ph/res_aki/36

Disciplines

Finance and Financial Management | Work, Economy and Organizations

Keywords

Hedging; Financial Risk; Derivatives; Financial Management; Risk Management

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