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<p.This study explores the extent and benefit of corporate hedging in South Africa by examining the disclosure of financial derivative instruments in the annual reports of non-financial companies listed on the JSE. The conflicting academic theory on hedging and the shortage of empirical evidence to support corporate hedging provide decision-makers, especially in South Africa, with poor information on the impact of hedging on the market value of their companies and, therefore, the total return provided to their shareholders. A database of derivative usage was constructed from the annual reports of all non-financial JSE-listed companies. The data was used to quantify the extent of derivative usage in South African and to construct the portfolios necessary to calculate the risk factors for the regression model. The Fama and French four-factor model was used as the basis for the regression analysis necessary to show whether or not hedging has a positive impact on annual stock price performance. The results show that hedging is prevalent in South Africa. However, the results provide evidence that corporate hedging through the use of derivative instruments is only a value-adding strategy for firms that exclusively use currency derivatives. The use of commodity or interest rate derivatives is not a value-adding strategy, nor is the use of currency derivatives in conjunction with commodity or interest rate derivatives. Copyright © 2006 University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria Please cite as follows: Towle, NR 2006, The impact of corporate hedging on stock price performance, MBA dissertation, University of Pretoria, Pretoria, viewed yymmdd < http://upetd.up.ac.za/thesis/available/etd-04012010-125509/...
Persistent link: https://www.econbiz.de/10009462385
They would possibly be less contentious if there wasconclusive proof that managers were better allocators of capital generatedthrough income retained than investors. Against this backdrop, this studyexamines the question of whether correlations exist between the amount ofincome retained by...
Persistent link: https://www.econbiz.de/10009462416
The objective of this study was to analyse the impact of business magazine coverstories, albeit positive, neutral or negative, on the share price of the featuredcompany. Two of the aspects of investment finance are rational behaviour andefficient markets. Both of these concepts were explored to...
Persistent link: https://www.econbiz.de/10009462463
Financial markets play a vital role in the allocation of funds for investment at alllevels of economic activity. Therefore, an understanding of the functioning offinancial markets is a critical business skill. Yet, history proves financialmarkets to be erratic creatures. The purpose of this...
Persistent link: https://www.econbiz.de/10009462612
This paper investigates whether there is a difference in the investor returns ofcompanies listed on the Johannesburg Stock Exchange. The analysis covers companieslisted in the financial and industrial sectors during the period January 2002 to June 2007and looks at overall returns, returns...
Persistent link: https://www.econbiz.de/10009462621
South Africa has a long history of mineral resource exploitation. As a result of accelerated economic growth in emerging markets in the last decade, the demand for metals and minerals has grown rapidly. Several countries have profited from this demand-supply imbalance while others have lagged...
Persistent link: https://www.econbiz.de/10009462658