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    Rights statement: http://journals.cambridge.org/action/displayJournal?jid=JFQ The final, definitive version of this article has been published in the Journal, Journal of Financial and Quantitative Analysis, 46 (4), pp 967-999 2011, © 2011 Cambridge University Press.

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The effects of derivatives on firm risk and value

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The effects of derivatives on firm risk and value. / Bartram, Sohnke; Brown, Gregory W.; Conrad, Jennifer S.

In: Journal of Financial and Quantitative Analysis, Vol. 46, No. 4, 09.2011, p. 967-999.

Research output: Contribution to journalJournal articlepeer-review

Harvard

Bartram, S, Brown, GW & Conrad, JS 2011, 'The effects of derivatives on firm risk and value', Journal of Financial and Quantitative Analysis, vol. 46, no. 4, pp. 967-999. https://doi.org/10.1017/S0022109011000275

APA

Bartram, S., Brown, G. W., & Conrad, J. S. (2011). The effects of derivatives on firm risk and value. Journal of Financial and Quantitative Analysis, 46(4), 967-999. https://doi.org/10.1017/S0022109011000275

Vancouver

Bartram S, Brown GW, Conrad JS. The effects of derivatives on firm risk and value. Journal of Financial and Quantitative Analysis. 2011 Sep;46(4):967-999. https://doi.org/10.1017/S0022109011000275

Author

Bartram, Sohnke ; Brown, Gregory W. ; Conrad, Jennifer S. / The effects of derivatives on firm risk and value. In: Journal of Financial and Quantitative Analysis. 2011 ; Vol. 46, No. 4. pp. 967-999.

Bibtex

@article{7109476791904354aaf554d362558bfa,
title = "The effects of derivatives on firm risk and value",
abstract = "Using a large sample of nonfinancial firms from 47 countries, we examine the effect of derivative use on firm risk and value. We control for endogeneity by matching users and nonusers on the basis of their propensity to use derivatives. We also use a new technique to estimate the effect of omitted variable bias on our inferences. We find strong evidence that the use of financial derivatives reduces both total risk and systematic risk. The effect of derivative use on firm value is positive but more sensitive to endogeneity and omitted variable concerns. However, using derivatives is associated with significantly higher value, abnormal returns, and larger profits during the economic downturn in 2001–2002, suggesting that firms are hedging downside risk.",
author = "Sohnke Bartram and Brown, {Gregory W.} and Conrad, {Jennifer S.}",
note = "http://journals.cambridge.org/action/displayJournal?jid=JFQ The final, definitive version of this article has been published in the Journal, Journal of Financial and Quantitative Analysis, 46 (4), pp 967-999 2011, {\textcopyright} 2011 Cambridge University Press.",
year = "2011",
month = sep,
doi = "10.1017/S0022109011000275",
language = "English",
volume = "46",
pages = "967--999",
journal = "Journal of Financial and Quantitative Analysis",
issn = "0022-1090",
publisher = "Cambridge University Press",
number = "4",

}

RIS

TY - JOUR

T1 - The effects of derivatives on firm risk and value

AU - Bartram, Sohnke

AU - Brown, Gregory W.

AU - Conrad, Jennifer S.

N1 - http://journals.cambridge.org/action/displayJournal?jid=JFQ The final, definitive version of this article has been published in the Journal, Journal of Financial and Quantitative Analysis, 46 (4), pp 967-999 2011, © 2011 Cambridge University Press.

PY - 2011/9

Y1 - 2011/9

N2 - Using a large sample of nonfinancial firms from 47 countries, we examine the effect of derivative use on firm risk and value. We control for endogeneity by matching users and nonusers on the basis of their propensity to use derivatives. We also use a new technique to estimate the effect of omitted variable bias on our inferences. We find strong evidence that the use of financial derivatives reduces both total risk and systematic risk. The effect of derivative use on firm value is positive but more sensitive to endogeneity and omitted variable concerns. However, using derivatives is associated with significantly higher value, abnormal returns, and larger profits during the economic downturn in 2001–2002, suggesting that firms are hedging downside risk.

AB - Using a large sample of nonfinancial firms from 47 countries, we examine the effect of derivative use on firm risk and value. We control for endogeneity by matching users and nonusers on the basis of their propensity to use derivatives. We also use a new technique to estimate the effect of omitted variable bias on our inferences. We find strong evidence that the use of financial derivatives reduces both total risk and systematic risk. The effect of derivative use on firm value is positive but more sensitive to endogeneity and omitted variable concerns. However, using derivatives is associated with significantly higher value, abnormal returns, and larger profits during the economic downturn in 2001–2002, suggesting that firms are hedging downside risk.

U2 - 10.1017/S0022109011000275

DO - 10.1017/S0022109011000275

M3 - Journal article

VL - 46

SP - 967

EP - 999

JO - Journal of Financial and Quantitative Analysis

JF - Journal of Financial and Quantitative Analysis

SN - 0022-1090

IS - 4

ER -