Dynamic Risk Management and Private Corporate Information: Evidence from Hedging Announcements

49 Pages Posted: 10 Oct 2015 Last revised: 6 May 2019

See all articles by Vikas Raman

Vikas Raman

Lancaster University - Department of Accounting and Finance

Chitru S. Fernando

University of Oklahoma - Michael F. Price College of Business

Seth A. Hoelscher

Missouri State University - College of Business

Date Written: June 20, 2016

Abstract

We study how markets respond to hedging change announcements by gold-mining firms, and provide new insights into both corporate hedging and whether firms have valuable private information. Equity and gold markets react strongly to hedging announcements, suggesting that firms who announce hedging policy changes have private information about future gold prices and firm value. Firms increase hedging in low equity value states and decrease hedging in high equity value states, highlighting the endogeneity in the relation between hedging and shareholder value. Our findings also suggest that firms who have private information are less likely to engage in market-timing when hedging.

Keywords: Corporate risk management, dynamic hedging, hedging changes, hedging announcements, disclosure, asymmetric information, gold mining firms.

JEL Classification: G11; G14; G32; G39

Suggested Citation

Raman, Vikas and Fernando, Chitru S. and Hoelscher, Seth, Dynamic Risk Management and Private Corporate Information: Evidence from Hedging Announcements (June 20, 2016). Available at SSRN: https://ssrn.com/abstract=2671878 or http://dx.doi.org/10.2139/ssrn.2671878

Vikas Raman

Lancaster University - Department of Accounting and Finance ( email )

The Management School
Lancaster LA1 4YX
United Kingdom

Chitru S. Fernando (Contact Author)

University of Oklahoma - Michael F. Price College of Business ( email )

Adams Hall
307 West Brooks Street
Norman, OK 73019-4004
United States
405-325-2906 (Phone)
405-325-7688 (Fax)

HOME PAGE: http://faculty-staff.ou.edu/F/Chitru.Fernando-1/

Seth Hoelscher

Missouri State University - College of Business ( email )

United States

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