Application Research Of Company Hedging Strategy

In recent years,affected by factors such as the Sino-US trade friction and the global epidemic,the sharp fluctuations of exchange rate and commodities have led to increased risks faced by listed companies,especially the non-ferrous metal industry,whose operation is not only closely related to the supply and demand of the upstream and downstream of the industrial chain,but also faces exchange rate risk caused by international trade business.The function of hedging is to hedge the risk of price,exchange rate and interest rate fluctuations,so hedging has become an important strategy for listed companies to carry out risk management.But at the same time,if the company’s hedging business deviates from the correct operation logic,it will also lead to the expansion of risk exposure,which will bring huge losses.Therefore,based on the case study,this thesis selects Tongling Nonferrous Metals,a representative non-ferrous metal industry,as the research object,and takes 2013 to 2021 as the time window to study whether the company has speculative behavior in the process of practical application of derivative financial instruments,as well as the practical application effect of the company’s hedging strategy.Historical literature shows that the main effect of hedging is to reduce the profit volatility of the company,stabilize business operations through hedging risks,so as to achieve the purpose of improving enterprise value.Therefore,the practical application effect of this thesis mainly refers to the effect of hedging on stable operation.The results of the case analysis show that in terms of the real purpose of applying derivative financial instruments,it can be considered that the company has the possibility of speculation because of the mismatch between the value of derivative contracts and the corresponding risk exposure;in terms of stabilizing enterprise management,through vertical comparison,comparing and eliminating the relevant indicators of the company before and after hedging,it is found that the application of hedging strategy can effectively reduce the profit volatility and cash flow volatility of Tongling Nonferrous Metals as a whole.The hedging strategy with the best inhibitory effect on profit volatility is to use copper futures contracts and forward foreign exchange contracts at the same time.On this basis,increasing the types of hedging tools will lead to a decrease in the inhibitory effect on profit volatility;in addition,through horizontal comparison,it is found that companies with higher risk aversion ratings also show more stable and more development advantages in various indicators of financial performance evaluation.Finally,according to the results of the case study,three suggestions are put forward for listed companies that carry out hedging:(1)Establish the correct hedging concept;(2)Improve the company’s risk management system;(3)Strengthen the integrity and standardization of relevant information disclosure.