Title: The impact of hedging on firm value: evidence from US multinational corporations

Authors: Shuming Bai; Bina Sharma Parajuli; Christie Ryan

Addresses: College of Business and Engineering, The University of Texas of the Permian Basin, Odessa, TX 79762, USA ' Robert C. Vackar College of Business and Entrepreneurship, The University of Texas Rio Grande Valley, Edinburg, TX 78539, USA ' First Basin Credit Union Commercial Lending, 2740 North County Road West, Odessa, TX 79764, USA

Abstract: This paper examines whether hedging can affect multinationals' firm value. Employing pooled cross-sectional time-series analysis of manually collected data of US multinational corporations from 2008 to 2015, this manuscript finds that (i) hedging activities are positively related to the firm value of multinational companies as implied by firm value maximisation theories; (ii) hedging significantly increases firm value by above 10% over the full-sample and the post-crisis sub-sample periods; but (iii) hedging appears insignificant and irrelevant during the global financial crisis period, which may indicate that global economic conditions could dominate any firm-level hedging activity effect. This is a new finding that contributes to the current hedging literature.

Keywords: currency hedging; financial crisis; firm value; multinational corporations; MNCs; multinationals; risk management.

DOI: 10.1504/IJSS.2016.082433

International Journal of Services and Standards, 2016 Vol.11 No.4, pp.380 - 392

Received: 12 Oct 2016
Accepted: 25 Oct 2016
Published online: 24 Feb 2017 *

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