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

See all articles by Hue Hwa Au Yong

Hue Hwa Au Yong

Monash University - Department of Banking and Finance; Financial Research Network (FIRN)

Robert W. Faff

University of Queensland

Hoa Nguyen

Deakin University - School of Accounting, Economics and Finance

Date Written: April 1, 2011

Abstract

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

Au Yong, Hue Hwa and Faff, Robert W. and Nguyen, Hoa, The Association between Firm Characteristics and the Use of a Comprehensive Corporate Hedging Strategy: An Ordered Probit Analysis (April 1, 2011). Frontiers in Finance and Economics, Vol. 8, No. 1, pp. 1-16, 2011. Available at SSRN: https://ssrn.com/abstract=2012335

Hue Hwa Au Yong

Monash University - Department of Banking and Finance ( email )

PO Box 197
Caulfield East, Victoria 3145
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Robert W. Faff (Contact Author)

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Hoa Nguyen

Deakin University - School of Accounting, Economics and Finance ( email )

221 Burwood Highway
Burwood, Victoria 3215
Australia

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