Borsa Istanbul Review · 2016 · 76 citations · 32 references
BusinessBusiness EconomicsEconomicsDerivativesEconometricsFinancial EconomicsCommodity DerivativesCurrency DerivativesFinancial RiskFirm ValueInterest Rate DerivativesPanel Data MethodsCommodity Price DerivativesCurrency HedgingDeterminants Of Firm ValueFama-french Five-factor ModelFama-french Three-factor ModelFirm Financial PerformanceFirm Value EffectsGmm Estimation
This study investigates how the use of financial derivatives by non‑financial Turkish firms from 2007‑2013 affects firm value. The authors employed Tobin’s Q ratio with panel data models, Fama‑French three‑factor time‑series analysis, and single‑sector analysis—including system GMM estimators—to assess the value relevance of derivatives use and separately tested currency, interest‑rate, and commodity hedging effects. The study finds that only 36.4% of Turkish non‑financial firms use derivatives, and while most analyses show no significant impact on firm value, a positive relationship emerges only when Tobin’s Q ratio with system GMM is applied, with similar findings for individual hedging types, leading to the conclusion that derivatives use generally does not affect firm value in Turkey.
This paper examines use of financial derivatives (currency, interest rate and commodity) and its effect on firm value of non-financial Turkish firms for period of 2007–2013. Only 36.41% of companies in our sample use derivatives to hedge their currency, interest rate or commodity price risks. We have used Tobin's Q ratio analysis with panel data models, Fama-French three-factor time-series analysis and single sector analysis to investigate whether corporate derivatives use is value relevant or not. Except Tobin's Q ratio analysis with system GMM estimators, we cannot find significant hedging premium or discount for all Turkish non-financial firms. We find a positive relationship between derivatives use and firm value, only when we use Tobin's Q ratio analysis with system GMM estimators. We also test the effects of currency hedging, interest rate hedging and commodity price hedging separately and find similar results as in the case of general derivatives use. Overall, majority of our results imply that use of financial derivatives does not affect firm value in Turkish market.
32