The use of derivatives and the cost of equity: Evidence from UK MNE’s = El uso de derivados y el costo de capital: Evidencia de empresas multinacionales en el Reino Unido

This paper studies the hedging activities of 104 non-financial UK MNEs from 2005 to 2009 to examine their potential effect on the cost of equity. We use the Fama and French Three Factor Model to estimate the cost of equity and we collect detailed information on hedging and risk management activities...

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Autor Principal: Caicedo Montana, María Ximena
Formato: Trabajo de grado (Bachelor Thesis)
Lenguaje:Desconocido (Unknown)
Publicado: 2014
Materias:
Acceso en línea:http://babel.banrepcultural.org/cdm/ref/collection/p17054coll23/id/339
id ir-p17054coll23-339
recordtype dspace
spelling ir-p17054coll23-3392020-09-29 The use of derivatives and the cost of equity: Evidence from UK MNE’s = El uso de derivados y el costo de capital: Evidencia de empresas multinacionales en el Reino Unido Caicedo Montana, María Ximena This paper studies the hedging activities of 104 non-financial UK MNEs from 2005 to 2009 to examine their potential effect on the cost of equity. We use the Fama and French Three Factor Model to estimate the cost of equity and we collect detailed information on hedging and risk management activities directly from the annual reports. Although we evidence a negative relation between the cost of equity and hedging activities, we find that the cost of equity is not significantly affected by whether firms are hedgers or non-hedgers. We further use different subsamples and we are able to observe that: (i) size and leverage are important factors in the analysis of hedging and cost of equity, and (ii) the financial crisis plays an active role in the way firms understand and react towards unexpected volatility and risk. Finally we find that controlling for endogeneity of the hedging decision and for potential sample selection bias our results are more robust and are supporting evidence for the negative and significant relationship between hedging and cost of equity. Cost of equity; Derivatives; Hedgers; Hedging; Risk; Risk management; Three factor model; Unexpected volatility Ciencias sociales; Ciencias sociales / Economía 2014 PDF Tesis ENG - Inglés Inglaterra Colfuturo © Derechos reservados del autor http://babel.banrepcultural.org/cdm/ref/collection/p17054coll23/id/339
institution Biblioteca Virtual Banco de la República - Colecciones digitales
collection Custom
language Desconocido (Unknown)
topic Cost of equity; Derivatives; Hedgers; Hedging; Risk; Risk management; Three factor model; Unexpected volatility
Ciencias sociales; Ciencias sociales / Economía
spellingShingle Cost of equity; Derivatives; Hedgers; Hedging; Risk; Risk management; Three factor model; Unexpected volatility
Ciencias sociales; Ciencias sociales / Economía
Caicedo Montana, María Ximena
The use of derivatives and the cost of equity: Evidence from UK MNE’s = El uso de derivados y el costo de capital: Evidencia de empresas multinacionales en el Reino Unido
description This paper studies the hedging activities of 104 non-financial UK MNEs from 2005 to 2009 to examine their potential effect on the cost of equity. We use the Fama and French Three Factor Model to estimate the cost of equity and we collect detailed information on hedging and risk management activities directly from the annual reports. Although we evidence a negative relation between the cost of equity and hedging activities, we find that the cost of equity is not significantly affected by whether firms are hedgers or non-hedgers. We further use different subsamples and we are able to observe that: (i) size and leverage are important factors in the analysis of hedging and cost of equity, and (ii) the financial crisis plays an active role in the way firms understand and react towards unexpected volatility and risk. Finally we find that controlling for endogeneity of the hedging decision and for potential sample selection bias our results are more robust and are supporting evidence for the negative and significant relationship between hedging and cost of equity.
format Trabajo de grado (Bachelor Thesis)
author Caicedo Montana, María Ximena
author_facet Caicedo Montana, María Ximena
author_sort Caicedo Montana, María Ximena
title The use of derivatives and the cost of equity: Evidence from UK MNE’s = El uso de derivados y el costo de capital: Evidencia de empresas multinacionales en el Reino Unido
title_short The use of derivatives and the cost of equity: Evidence from UK MNE’s = El uso de derivados y el costo de capital: Evidencia de empresas multinacionales en el Reino Unido
title_full The use of derivatives and the cost of equity: Evidence from UK MNE’s = El uso de derivados y el costo de capital: Evidencia de empresas multinacionales en el Reino Unido
title_fullStr The use of derivatives and the cost of equity: Evidence from UK MNE’s = El uso de derivados y el costo de capital: Evidencia de empresas multinacionales en el Reino Unido
title_full_unstemmed The use of derivatives and the cost of equity: Evidence from UK MNE’s = El uso de derivados y el costo de capital: Evidencia de empresas multinacionales en el Reino Unido
title_sort use of derivatives and the cost of equity: evidence from uk mne’s = el uso de derivados y el costo de capital: evidencia de empresas multinacionales en el reino unido
publishDate 2014
url http://babel.banrepcultural.org/cdm/ref/collection/p17054coll23/id/339
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