The Value Effects Of Derivatives Hedging In China

As lubricants of promoting financial globalization and world's large-scale production, derivatives can promote financial and physical economic prosperity. They can avoid risk, on the other hand, they can make risk concentration and then make the financial market be in a turmoil. Global financial crisis occurred in the year of 2008 is the best example. With the decline of exports, the rising in the raw materials prices as well as exchange rate of RMB, domestic enterprises are forced to face the risk brought by this financial crisis. Because transaction of derivatives is one of the important means of risk management, like other countries, China is also eager to learn whether the use of derivatives can help enterprises to manage risk effectively and enhance the firm value.On the basis of summing up and reviewing domestic and foreign literatures, this paper is directed at the situation of hedging occurred in the China's listed companies and selects the listed companies in the Yangtze River Delta region as research objectives to examine the relation of the use of derivatives and the firm value by empirical model.This paper can be divided into six sections, including introduction, review of domestic and foreign literature, theory of research, The situation of the use of derivatives in China's listed companies, empirical analyses of the relation between hedging and the firm value, as well as conclusions and recommendations. The fifth section is the core of the paper. In this section, we select 303 non-financial listed companies in the Yangtze River Delta region from 2006 to 2008 as samples, construct a multiple linear regression model basing on the research results of traditional influence factors of the firm value, deeply analyze the relationship between the use of derivatives and the firm value.The main conclusions of this paper are:The number of companies which participate in hedging is a little and there are not many kinds of derivatives to use; We find the positive significantly relationship between the use of derivatives and the firm value. The firm value of the listed companies which use derivatives to hedge are higher than those non-hedgers, and the hedging premium is on average 7.1%; The higher the hedging intensity and the ratio of the hedging profit and the net assets, the higher the firm value, the hedging premium is on average 7.2%and 23.1%respectively; Owing to the short history of using of derivatives, lack of experiences and existing some problems on operations and control of risk, we don't find evidence to support the hypothesis that hedging is much more valuable when the external environment deteriorates. In the view of this, this paper presents the following suggestions:First, encourage the listed companies to use of derivatives reasonably; Second, develop derivative market quickly; Third, train talents on derivatives; Forth, further improve the information disclosure system about derivatives used by the listed companies.