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Investigating the determinants of the decision to engage in a corporate hedging strategy

Yong, H., Faff, R. and Nguyen, Hoa 2006, Investigating the determinants of the decision to engage in a corporate hedging strategy, Journal for studies in economics and econometrics, vol. 30, no. 1, pp. 147-160.

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Title Investigating the determinants of the decision to engage in a corporate hedging strategy
Author(s) Yong, H.
Faff, R.
Nguyen, Hoa
Journal name Journal for studies in economics and econometrics
Volume number 30
Issue number 1
Start page 147
End page 160
Publisher Buro vir Ekonomiese Ondersoek
Place of publication Stellenbosch, South Africa
Publication date 2006
ISSN 0379-6205
Keyword(s) hedge
foreign currency
interest rates
derivatives
Summary This paper investigates the decision to engage in a comprehensive corporate hedging strategy for Australian listed companies. Specifically the pursuit of a comprehensive hedging strategy is gauged by jointly investigating the corporate use of foreign currency derivatives; interest rate derivatives; commodity derivatives and foreign debt. The results show that firm size, leverage, dividend yield and block holdings are incentive factors to the comprehensive hedging decision, while executive shares is a disincentive factor. Consistent with hedging theory, the significance of the leverage variables supports the financial distress cost hypothesis. Support is also found for the dividend decision is a substitute for corporate hedging.

Language eng
Field of Research 150201 Finance
HERDC Research category C1 Refereed article in a scholarly journal
Persistent URL http://hdl.handle.net/10536/DRO/DU:30008939

Document type: Journal Article
Collection: School of Accounting, Economics and Finance
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