Commodity Futures To Hedge The Impact On Corporate Value

With the fact that development of the whole world capital market and the needs of risk management increasing , more and more enterprises use derivatives for risk management.And for our country, effective risk controlling is also very important just because more companies are active to attend in international transaction and the price of raw materials and products fluctuates greatly.This article discusses whether the use of commodity futures hedging can increase the firm value or not in our country.Firstly,we introduce the development of theory about hedging and firm value.Then we compare the current situation between abroad and at home. On this basis, we demonstrate our topic from two aspects.The samples in this crticle are the 59 listed companies of non-ferrous metal industry from 1997 to 2007.Secondly,We start the demonstration from the market angle,which study the impact of heding over the stock price fluctuation. Owing to the uncertainty of the futures and stock market's fluctuation,we make sure the relationship of variables by ADF test,cointegration test and Granger causual analysis.Then we check the hedging effect on stock fluctuation using the VAR-BEKK model.The result shows that hedging can reduce the fluctuation of share price over futures price. Furthermore, the main body of article is adopt to study the impact of the hedging on firm value directly. We use Tuobin Q to judge firm value.Then compare wheather there is great difference between hedgers and non-hedgers by Wilconxon test.And we build factor analysis model to demonstrate the great influencing factor for firm value. Finally, to check the robustness of our results,we conduct sensitivity analysis on the relationship between firm value and heding.The result is that size and cost of financial distress are the most important factor for heding decision. In Our country, companies participate in hedging can not increase firm value of all.But to the large companies is helpful to firm value since the exisring of the scale effect in participation.At the end,the article state some policy suggestions based on the result of demonstrate,such as encouraging our country enterprises to participate in the heding activty , derivatives development and foster professional etc.