Financial Hedging and Firm Performance: Evidence from Cross‐Border Mergers and Acquisitions

44 Pages Posted: 3 Jun 2017

See all articles by Zhong Chen

Zhong Chen

King's Business School, King's College London

Bo Han

Central Washington University

Yeqin Zeng

University of Reading

Date Written: June 2017

Abstract

Using a sample of 1,369 cross‐border acquisitions announced by Standard & Poor's 1500 firms between 2000 and 2014, we find strong evidence that derivatives users experience higher announcement returns than non‐users, which translates into a US$ 193.7 million shareholder gain for an average‐sized acquirer. In addition, we find that acquirers with hedging programmes have higher deal completion probabilities, longer deal completion times, and better long‐term post‐deal performance. We confirm our findings after employing an extensive array of models to address potential endogeneity. Overall, our results provide new insights into a link between corporate financial hedging and firm performance.

Keywords: cross‐border M&As, risk management, financial derivatives

Suggested Citation

Chen, Zhong and Han, Bo and Zeng, Yeqin, Financial Hedging and Firm Performance: Evidence from Cross‐Border Mergers and Acquisitions (June 2017). European Financial Management, Vol. 23, Issue 3, pp. 415-458, 2017, Available at SSRN: https://ssrn.com/abstract=2979682 or http://dx.doi.org/10.1111/eufm.12103

Zhong Chen (Contact Author)

King's Business School, King's College London ( email )

Bush House
London, WC2B 4BG
United Kingdom

Bo Han

Central Washington University ( email )

400 E. University Way
Ellensburg, WA 98926
United States

Yeqin Zeng

University of Reading ( email )

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