The Association between Firm Characteristics and the Use of a Comprehensive Corporate Hedging Strategy: An Ordered Probit Analysis
16 Pages Posted: 28 Feb 2012 Last revised: 31 Jan 2015
Date Written: April 1, 2011
We investigate the potential factors that influence the corporate decision to collectively use foreign currency; interest rate; and commodity derivatives and foreign debt. Our Australian results show that firm size (‘scale economies’ hypothesis); leverage (‘financial distress cost’ hypothesis); and block holdings are positively associated with the comprehensive hedging decision, while executive shareholdings has a negative association. However, we do not find any support for the underinvestment or managerial risk aversion hypotheses.
Keywords: derivative use, coordinated corporate hedging strategy, ordered
JEL Classification: G30, G32
Suggested Citation: Suggested Citation