JFRM  Vol.3 No.3 , September 2014
Foreign Currency Derivatives and Firm Value: Evidence from New Zealand
ABSTRACT
The benefit of corporate hedging remains controversial. While hedging could reduce the likelihood of adverse outcome, it will incur additional costs that may offset such benefit. This study provides some evidences to resolve the debate. We examine the benefits of foreign currency derivatives usage in 134 non-financial firms listed on the New Zealand Stock Exchange. New Zealand dollar experiences relatively high volatility so it is an ideal setting to examine whether the currency derivative usage could add value to the firm. Using Tobin-Q and other of its variants as a proxy of firm value, we find no evidence supporting the notion that the use of foreign currency derivatives can enhance a firm value.

Cite this paper
Li, H. , Visaltanachoti, N. and Luo, R. (2014) Foreign Currency Derivatives and Firm Value: Evidence from New Zealand. Journal of Financial Risk Management, 3, 96-112. doi: 10.4236/jfrm.2014.33010.
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