Are firms hedging or speculating? The relationship between financial derivatives and firm risk

Nguyen, Hoa and Faff, Robert 2010, Are firms hedging or speculating? The relationship between financial derivatives and firm risk, Applied Financial Economics, vol. 20, no. 10, pp. 827-843.

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Title Are firms hedging or speculating? The relationship between financial derivatives and firm risk
Author(s) Nguyen, Hoa
Faff, Robert
Journal name Applied Financial Economics
Volume number 20
Issue number 10
Start page 827
End page 843
Total pages 17
Publisher Taylor & Francis
Place of publication London, England
Publication date 2010-05-21
ISSN 0960-3107
1466-4305
Summary The focus of this article is an investigation of the relationship between the use of financial derivatives and firm risk using a sample of Australian firms. Our results suggest that this relationship is nonlinear in nature. Specifically, the use of financial derivatives is associated with a risk reduction for moderate derivative users. Derivative usage among extensive derivative users, on the other hand, appears to lead to an increase in firm risk. Nevertheless, compared to firms that do not make use of derivatives, there is no evidence that extensive derivative users are exposed to a risk level in excess of that of nonderivative users. The results are, therefore, indicative of a hedging motive behind the use of financial derivatives.
Language eng
Field of Research 140207 Financial Economics
Socio Economic Objective 900101 Finance Services
HERDC Research category C1 Refereed article in a scholarly journal
Copyright notice ©2010, Taylor and Francis
Persistent URL http://hdl.handle.net/10536/DRO/DU:30029759

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