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http://dx.doi.org/10.5392/JKCA.2012.12.03.285

Impact of Foreign Currency Derivative Usage on Firm Value  

Jeon, Sang-Won (공군 제 18전투비행단)
Kang, Shin-Ae (서울과학기술대학교)
Publication Information
The Journal of the Korea Contents Association / v.12, no.3, 2012 , pp. 285-294 More about this Journal
Abstract
Under conditions of increasing environmental uncertainty, firms' risk management become important. This study examines the impact of foreign currency derivative usage on firm value using 3,004 Korean non-financial firms from 2002 to 2007. The results showed that there was no significant relationship between foreign currency derivative usage and firm value for the whole period and from 2002 to 2004 when exchange rate was relatively less volatile. But form 2005 to 2007 when exchange rate was volatile, foreign currency derivative usage gave significant negative impact on firm value, whereas when contract value was used, the relatinship was significantly positive. These results might be come from the characteristics of contract value and fair value of foreign currency derivatives. increased firm value when contract value was used as foreign currency derivative usage measure. But when fair value was used, there was no significance. For control variables, major shareholders ownership and foreign blockholders ownership was positively related with firm value.
Keywords
Foreign Exchange Risk; Foreign Currency Derivatives; Fair Value; Contract Value; Firm Value;
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