Hedging effectiveness in shipping industry during financial crises

Abstract

This paper investigates the significance of financial derivatives in shipping firms and its potential impact on their firm value. The methodology applied in order to measure firms' value is Tobin's Q. The investigation whether shipping firms can decrease their risk exposure and increase their value by using financial derivatives is considered to be essential. The sample of this study consists of shipping firms which are listed in US stock exchanges where the impact of financial crisis was first seen. The empirical evidence of this paper indicates that the use of derivatives minimise shipping firms' risk exposure and guarantee their growth.