Does Hedging with Derivatives Affect Future Crash Risk?

• 발행기관: 한국유통과학회
• 저자명: Hyun-Young PARK Soo Yeon PARK
• 간행물 정보: 『The Journal of Asian Finance, Economics and Business(JAFEB)』Vol. 7 No.4, 51~58쪽, 전체 8쪽
• 주제분류: 경제경영 > 경제학
• 파일형태: PDF
• 발행일자: 2020.04.30

영문 초록

The study aims to investigate the relationship between hedging with derivatives and subsequent firm-level stock price crash risk. Our sample consists of KOSPI- and KOSDAQ-listed companies from 2004 to 2014. The total firm-year observation is 4,886. We find that hedging with derivatives is related to greater possibilities of crash risk. The results suggest that the complexity of economic and financial reporting for derivatives may aggravate the company s information opacity, ultimately increasing the crash risk. We contribute to the growing body of literature on hedging with derivatives. Academics and practitioners have debated on whether or not hedging enhances transparency or rather makes the information environment more opaque. Theoretical research on the role of corporate hedging on information environment shows that hedging enhances earnings informativeness. Meanwhile, pieces of anecdotal and empirical evidence show that the economic and financial reporting complexity of derivatives can harm information transparency. Our results shed light on the question of whether and how hedging with derivatives affects information environment by examining the relationship between hedging with derivatives and crash risk. Furthermore, our findings provide useful insights for policymakers and practitioners. Specifically, our results raise a need for a more transparent disclosure on corporate hedging activities with derivatives.

목차

1. Introduction

2. Literature Review

3. Research Design

4. Empirical Results

5. Conclusion

References

Appendix

키워드

Derivatives Hedging Information Environment Stock Price Crash Risk