Hedging and Company Value â€“ A Comparison between South Africa and United States of America
Keywords:The purpose of the study was to determine the impact of hedging with derivatives on company value on listed non-financial companies in South Africa (SA) and compare these to companies in a developed nation like the United States of America (USA) in terms
The purpose of the study was to determine the impact of hedging with derivatives on company value on listed non-financial companies in South Africa (SA) and compare these with companies in a developed nation like the United States of America (USA) in terms of how the use of derivatives impacts on the company value. The premium or discount in company value is represented by the Tobinâ€™s Q ratio. The study analyses the different types of derivatives and what impact each type of derivative has on the company value from 2006-2009. In most cases, the outcome of the analysis did not find strong evidence that usersâ€™ of derivativesâ€™ company values trade at a premium to non-users.
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