Does the Use of Foreign Currency Derivatives Affect Firms' Market Value? Evidence from Colombia

This study tests the effects of risk management and hedging decisions on firms' market value. Using information on Colombian nonfinancial firms and the locale's most liquid derivatives market, we find that for a panel of eighty-one large Colombian corporations the growth rate of Tobin's q depends significantly on a firm's size and hedging. Our results suggest that an increase in hedging leads to a higher growth in the firms' value.

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