A Study on the Impact of Derivatives on Firm Value
Abstract In today's globalized era all firms face an assortment of exchange rate risk in the due course of their normal business. In this context, the usage of financial derivatives as an integral part of the corporate risk management has afforded the managers of large corporation with a whole...
| Main Author: | |
|---|---|
| Format: | Dissertation (University of Nottingham only) |
| Language: | English |
| Published: |
2008
|
| Subjects: | |
| Online Access: | https://eprints.nottingham.ac.uk/22317/ |
| _version_ | 1848792389662015488 |
|---|---|
| author | Rathnasamy, Kiruthiga |
| author_facet | Rathnasamy, Kiruthiga |
| author_sort | Rathnasamy, Kiruthiga |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | Abstract
In today's globalized era all firms face an assortment of exchange rate risk in the due course of their normal business. In this context, the usage of financial derivatives as an integral part of the corporate risk management has afforded the managers of large corporation with a whole range of derivative instruments to mitigate the risk or even to
add value to the firm.
But with the recent spate of the major losses allied with improper use of derivatives leading to huge losses all over the world and bring most of the economies to the brink of recession however leads to an interesting question whether firms should implement
hedging strategies as a risk management tool. This research aims to solve this puzzle empirically by analyzing the impact of currency derivatives usage on firm's value. The author uses simple Q as an approximation of the market value of the non financial firms
listed in FTSE 350 of the London Stock Exchange from the year 2003-2007.
The results arrived at show that there is no positive relationship between the firm's value and the usage of currency derivatives. The author makes another important inference in the findings consistent with many other studies on relevant topic that 78% of the sample
uses derivatives in the longer horizon which leaves open a further investigation on the nonlinear relationship approach to address the same question. This would help to solve the puzzle by using consolidated approach. The results also shows that currency derivatives is the most widely used managed form of risk management to manage the
volatility in cash flows. |
| first_indexed | 2025-11-14T18:43:38Z |
| format | Dissertation (University of Nottingham only) |
| id | nottingham-22317 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-14T18:43:38Z |
| publishDate | 2008 |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-223172018-02-16T23:48:40Z https://eprints.nottingham.ac.uk/22317/ A Study on the Impact of Derivatives on Firm Value Rathnasamy, Kiruthiga Abstract In today's globalized era all firms face an assortment of exchange rate risk in the due course of their normal business. In this context, the usage of financial derivatives as an integral part of the corporate risk management has afforded the managers of large corporation with a whole range of derivative instruments to mitigate the risk or even to add value to the firm. But with the recent spate of the major losses allied with improper use of derivatives leading to huge losses all over the world and bring most of the economies to the brink of recession however leads to an interesting question whether firms should implement hedging strategies as a risk management tool. This research aims to solve this puzzle empirically by analyzing the impact of currency derivatives usage on firm's value. The author uses simple Q as an approximation of the market value of the non financial firms listed in FTSE 350 of the London Stock Exchange from the year 2003-2007. The results arrived at show that there is no positive relationship between the firm's value and the usage of currency derivatives. The author makes another important inference in the findings consistent with many other studies on relevant topic that 78% of the sample uses derivatives in the longer horizon which leaves open a further investigation on the nonlinear relationship approach to address the same question. This would help to solve the puzzle by using consolidated approach. The results also shows that currency derivatives is the most widely used managed form of risk management to manage the volatility in cash flows. 2008 Dissertation (University of Nottingham only) NonPeerReviewed application/pdf en https://eprints.nottingham.ac.uk/22317/1/final_dissertation.pdf Rathnasamy, Kiruthiga (2008) A Study on the Impact of Derivatives on Firm Value. [Dissertation (University of Nottingham only)] (Unpublished) Impact of derivatives on Firm value |
| spellingShingle | Impact of derivatives on Firm value Rathnasamy, Kiruthiga A Study on the Impact of Derivatives on Firm Value |
| title | A Study on the Impact of Derivatives on Firm Value |
| title_full | A Study on the Impact of Derivatives on Firm Value |
| title_fullStr | A Study on the Impact of Derivatives on Firm Value |
| title_full_unstemmed | A Study on the Impact of Derivatives on Firm Value |
| title_short | A Study on the Impact of Derivatives on Firm Value |
| title_sort | study on the impact of derivatives on firm value |
| topic | Impact of derivatives on Firm value |
| url | https://eprints.nottingham.ac.uk/22317/ |