The Determinants of Foreign Currency Hedging–Evidence from Hong Kong Non-Financial Firms

Hu, Chao; Wang, Pengguo

doi:10.1007/s10690-006-9014-9

Cited by 15 publications

(10 citation statements)

References 28 publications

(35 reference statements)

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“…290 (67.6 per cent) firms have not reported use of either a forward, swap, option, and/or futures contract over the reporting period of 2006‐2007 in our sample. Overall, 18 per cent of the Malaysian listed firms in our sample use forward contract for the transaction exposure which is relatively lower than 31 per cent for Hong Kong (Hu and Wang, 2006) and 87 per cent for the UK (Joseph, 2000), respectively. The number of firms using swap contract (5.70 per cent) is also lower than reported for the UK firms (18.90 per cent):…”

Section: Resultsmentioning

confidence: 90%

Market risk disclosure: evidence from Malaysian listed firms

Othman

Ameer

2009

Journal of Financial Regulation and Compliance

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PurposeThe purpose of this paper is to investigate the market risk disclosure practices among Malaysian listed firms. Specifically, it aims to examine the level of compliance with FRS132: Financial Instruments – Disclosure and Presentation for financial periods beginning or after 2006.Design/methodology/approachThe approach taken is content analysis and coding procedure.FindingsAlthough a large number of companies have shown compliance with FRS132 in relation to disclosing the financial risk management policy, there are systematic differences across companies in terms of level of details (i.e. qualitative and quantitative) disclosure. Interest rate disclosure was the most mentioned category and the credit risk was the least mentioned category of market risk. There is telling evidence that most Malaysian firms did not engage in hedging any type of market risk over the reporting period of 2006‐2007.Research limitations/implicationsThere is a need for some standardized risk reporting format to achieve greater financial transparency to make investors aware of the market risks.Originality/valueThis is believed to be the first study to provide survey findings on the use of derivatives instruments by listed firms in Malaysia.

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Section: Resultsmentioning

confidence: 90%

Market risk disclosure: evidence from Malaysian listed firms

Othman

Ameer

2009

Journal of Financial Regulation and Compliance

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“…A few studies have investigated market risk disclosure practices of the firms in Asia-Pacific region. For instance, Nguyen and Faff (2003), Chalmers and Godfrey (2000) and Chalmers (2001) investigated the impact of derivatives reporting for firms in Australia, and Hu and Wang (2006) examined usage of derivatives among firms in Hong Kong. Thus, a major motivation behind this study is to examine the level of FCDs usage among listed firms in Malaysia.…”

Section: Related Studiesmentioning

confidence: 99%

Value‐relevance of foreign‐exchange and interest‐rate derivatives disclosure

Ameer

2009

The Journal of Risk Finance

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Purpose -This paper aims to examine the state of risk management practices among Malaysian listed firms and evaluates the value-relevance of the notional amount of foreign-exchange and interest-rate derivatives (FCDs) used by listed firms over the period [2003][2004][2005][2006][2007]. Design/methodology/approach -Application of linear regression framework. Findings -It is found that a few Malaysian firms hedge market risks. Firms in the plantation, industrial product, trading services, and consumer products manufacturing sectors are the main users of the FCDs in Malaysia. There is a significant positive correlation between total earnings and the use of derivatives. The findings seem to suggest that although disclosed notional amount of the derivatives have value-relevance but its contribution to a firm's valuation is very minimal in Malaysia compared to other countries. Practical implications -The findings imply that those investors who have investment in those firms who use derivatives to hedge against foreign currency and interest risks benefit, albeit marginally. At present, most of the Malaysian firms are either cautious or unsure about the use of derivative instruments. There is a need to inform managers about usefulness of the derivatives and market risk reporting that would contribute to greater financial transparency. Originality/value -The author believes that this is the first study to provide survey findings on the use of derivatives instruments and their value-relevance in Malaysia.

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“…(Smith, Stulz, 1985;Stulz, 1984;Froot et al, 1993;Myers, 1977). By using various sample data of both developed and emerging economies, the present literature finds that the corporate use of derivative instruments enables corporations in decreasing cash flow variability by hedging financial distress cost, agency costs, exchange rate exposure (Horng, Wei, 1999;Haushalter, 2000;Nguyen, Faff, 2002;El-Mersy, 2006;Hu, Wang, 2005;Hsu et al, 2009;Ameer, 2010;Afza, Alam, 2011(a, b & c)).…”

Section: Literature Reviewmentioning

confidence: 87%

Impact of derivative usage on firm’s risk and value: a comparative analysis of Pakistan and Malaysia

Alam

Afza

2017

Argumenta Oeconomica

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This study empirically examines the effect of derivative usage on firm's risk and value by employing sample data of Pakistani and Malaysian listed companies for the period of 2004-2010. Supporting the risk management use of derivative instruments, the study finds that the usage of derivative instruments significantly minimizes firm's risk, with respect to operating cash flow variability in both Pakistan and Malaysia, although the extent of risk reduction is higher in Malaysian firms. While considering variability in earning per share as a firm's risk, the findings imply that Pakistani firm's earning per share variability is irrelevant for firm's derivative usage, whereas Malaysian firms are able to minimize such volatility by using derivative instruments. The results show the insignificant effect regarding the relationship of derivative usage with firm's value of Malaysian corporations, indicating that as Malaysia has developed capital market and firms are more geographically diversified in comparison to Pakistan, thus their value relevance of derivative usage are limited. While in the case of Pakistan, the use of derivative instruments significantly enhances firm's value.

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The Determinants of Foreign Currency Hedging–Evidence from Hong Kong Non-Financial Firms

Abstract: currency hedging, currency policy, financial distress, growth options, tax saving,

Cited by 15 publications

References 28 publications

Market risk disclosure: evidence from Malaysian listed firms

Market risk disclosure: evidence from Malaysian listed firms

Value‐relevance of foreign‐exchange and interest‐rate derivatives disclosure

Impact of derivative usage on firm’s risk and value: a comparative analysis of Pakistan and Malaysia

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