Hedging strategies with financial derivatives on pulp & paper industry : a quantitative study
Autor(a) principal: | |
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Data de Publicação: | 2016 |
Tipo de documento: | Dissertação |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10400.14/36136 |
Resumo: | This work studies the hedging policies of 42 pulp and paper companies in 2014. My focus is on the use of financial derivatives as a hedging strategy to mitigate the commodity risk exposure. Theories of hedging based on market imperfections show that hedging should increase firm´s value by reducing expected taxes, probability of financial distress and the agency costs of debt and equity. To provide evidence on these hypotheses, I collected detailed financial information of the firms included in the sample, to develop two econometric models capable of giving consistent insights, in order to infer which firm´s characteristics are associated to the theoretical hedging incentives and if consequently this hedging decision is connected to higher firm value within this industry. The data suggest that hedger firms have less coverage of fixed claims and have a higher percentage of managerial ownership comparing to the non-hedger firms. Furthermore, I found evidence that there is no advantage for larger firms within this industry to develop hedging strategies to mitigate their commodity risk exposure, not giving support to the argument of economies in scale in hedging. There is also no support for the hedging tax incentive, rejecting the theoretical background that firms hedge in response to tax schedule convexity. Using Tobin´s Q as an approximation for firm value, I found evidence that firms with more growth opportunities in their investment set and with lower levels of debt have higher Tobin´s Q ratios. However, I found evidence that hedging commodity risk within this industry with financial derivatives does not seem to be a value-enhancing strategy for firms. |
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Hedging strategies with financial derivatives on pulp & paper industry : a quantitative studyDomínio/Área Científica::Ciências Sociais::Economia e GestãoThis work studies the hedging policies of 42 pulp and paper companies in 2014. My focus is on the use of financial derivatives as a hedging strategy to mitigate the commodity risk exposure. Theories of hedging based on market imperfections show that hedging should increase firm´s value by reducing expected taxes, probability of financial distress and the agency costs of debt and equity. To provide evidence on these hypotheses, I collected detailed financial information of the firms included in the sample, to develop two econometric models capable of giving consistent insights, in order to infer which firm´s characteristics are associated to the theoretical hedging incentives and if consequently this hedging decision is connected to higher firm value within this industry. The data suggest that hedger firms have less coverage of fixed claims and have a higher percentage of managerial ownership comparing to the non-hedger firms. Furthermore, I found evidence that there is no advantage for larger firms within this industry to develop hedging strategies to mitigate their commodity risk exposure, not giving support to the argument of economies in scale in hedging. There is also no support for the hedging tax incentive, rejecting the theoretical background that firms hedge in response to tax schedule convexity. Using Tobin´s Q as an approximation for firm value, I found evidence that firms with more growth opportunities in their investment set and with lower levels of debt have higher Tobin´s Q ratios. However, I found evidence that hedging commodity risk within this industry with financial derivatives does not seem to be a value-enhancing strategy for firms.Cunha, Manuel Ricardo Fontes daVeritati - Repositório Institucional da Universidade Católica PortuguesaFerreira, Telmo Rodrigues2021-12-07T16:41:22Z2017-03-312016-042017-03-31T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/masterThesisapplication/pdfhttp://hdl.handle.net/10400.14/36136TID:201757680enginfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-07-12T17:41:38Zoai:repositorio.ucp.pt:10400.14/36136Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T18:29:20.638822Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
Hedging strategies with financial derivatives on pulp & paper industry : a quantitative study |
title |
Hedging strategies with financial derivatives on pulp & paper industry : a quantitative study |
spellingShingle |
Hedging strategies with financial derivatives on pulp & paper industry : a quantitative study Ferreira, Telmo Rodrigues Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
title_short |
Hedging strategies with financial derivatives on pulp & paper industry : a quantitative study |
title_full |
Hedging strategies with financial derivatives on pulp & paper industry : a quantitative study |
title_fullStr |
Hedging strategies with financial derivatives on pulp & paper industry : a quantitative study |
title_full_unstemmed |
Hedging strategies with financial derivatives on pulp & paper industry : a quantitative study |
title_sort |
Hedging strategies with financial derivatives on pulp & paper industry : a quantitative study |
author |
Ferreira, Telmo Rodrigues |
author_facet |
Ferreira, Telmo Rodrigues |
author_role |
author |
dc.contributor.none.fl_str_mv |
Cunha, Manuel Ricardo Fontes da Veritati - Repositório Institucional da Universidade Católica Portuguesa |
dc.contributor.author.fl_str_mv |
Ferreira, Telmo Rodrigues |
dc.subject.por.fl_str_mv |
Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
topic |
Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
description |
This work studies the hedging policies of 42 pulp and paper companies in 2014. My focus is on the use of financial derivatives as a hedging strategy to mitigate the commodity risk exposure. Theories of hedging based on market imperfections show that hedging should increase firm´s value by reducing expected taxes, probability of financial distress and the agency costs of debt and equity. To provide evidence on these hypotheses, I collected detailed financial information of the firms included in the sample, to develop two econometric models capable of giving consistent insights, in order to infer which firm´s characteristics are associated to the theoretical hedging incentives and if consequently this hedging decision is connected to higher firm value within this industry. The data suggest that hedger firms have less coverage of fixed claims and have a higher percentage of managerial ownership comparing to the non-hedger firms. Furthermore, I found evidence that there is no advantage for larger firms within this industry to develop hedging strategies to mitigate their commodity risk exposure, not giving support to the argument of economies in scale in hedging. There is also no support for the hedging tax incentive, rejecting the theoretical background that firms hedge in response to tax schedule convexity. Using Tobin´s Q as an approximation for firm value, I found evidence that firms with more growth opportunities in their investment set and with lower levels of debt have higher Tobin´s Q ratios. However, I found evidence that hedging commodity risk within this industry with financial derivatives does not seem to be a value-enhancing strategy for firms. |
publishDate |
2016 |
dc.date.none.fl_str_mv |
2016-04 2017-03-31 2017-03-31T00:00:00Z 2021-12-07T16:41:22Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/masterThesis |
format |
masterThesis |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10400.14/36136 TID:201757680 |
url |
http://hdl.handle.net/10400.14/36136 |
identifier_str_mv |
TID:201757680 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
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info:eu-repo/semantics/openAccess |
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openAccess |
dc.format.none.fl_str_mv |
application/pdf |
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reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
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Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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RCAAP |
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RCAAP |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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1799132013703200768 |