Dynamic Risk Management and Private Corporate Information: Evidence from Hedging Announcements
49 Pages Posted: 10 Oct 2015 Last revised: 6 May 2019
Date Written: June 20, 2016
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: Suggested Citation