Purpose – In this study, we investigate determinants of hedging with derivatives and its effect on firm value and firm risk for Korean firms. Design/methodology – To avoid the endogeneity problem pointed out in previous studies, we use a two-stage analysis by using gains and losses from derivatives as instrument variable for hedging with derivatives. Findings – Our analysis on the determinants of hedging shows that firms that are more leveraged and less profitable, and with more growth opportunities are likely to hedge through derivatives. Additionally, large firms, firms less diversified into industry, and firms more diversified geographically are likely to use derivatives. Our two-stage analysis shows that indicators of hedging with derivatives have an insignificant effect on firm value, and the indicator of futures/forwards use and of swaps use have significant negative effect on firm value. Whereas, the extent of hedging with derivatives has positive effect on firm value for all types of foreign currency derivatives, which suggests that moderately low hedgers use derivatives inefficiently, but extensive hedgers use derivatives properly. With regard to firm risk, hedging with derivatives increases market-based risk, but decreases accounting-based risk. Thus, we conclude that Korean firms use derivatives to manage operational volatility rather than to manage market risk, and accounting-based risk reduction through hedging is not directly translated into higher firm value. Originality/value – This is not the first study to investigate hedging behavior of Korean firms, but the sample period that that this study analyzed is the longest and various method are used to control the endogeneity problem. We investigate not only total foreign currency derivatives but also by types of derivatives, including futures/forwards, options, and swaps.

中文翻译：

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套期保值的决定因素及其对公司价值和风险的影响：使用两阶段分析控制内生性之后

目的–在本研究中，我们调查了衍生品对冲的决定因素及其对韩国公司的公司价值和公司风险的影响。设计/方法论–为了避免先前研究中指出的内生性问题，我们使用两阶段分析，将衍生工具的收益和损失用作工具进行衍生工具对冲。调查结果–我们对套期保值决定因素的分析表明，杠杆率更高，利润更低，增长机会更多的公司很可能通过衍生品进行套期保值。此外，大公司，行业多元化程度较低的公司以及地域多元化程度较高的公司可能会使用衍生产品。我们的两阶段分析表明，使用衍生工具进行套期保值的指标对公司价值的影响不大，期货/远期使用和掉期使用的指标对公司价值具有重大的负面影响。鉴于衍生品对冲的程度对所有类型的外币衍生品的公司价值都有正面影响，这表明适度低的套期保值者使用衍生品的效率低下，而广泛的套期保值者正确使用衍生品。关于公司风险，使用衍生品对冲会增加基于市场的风险，但会减少基于会计的风险。因此，我们得出的结论是，韩国公司使用衍生工具来管理业务波动性，而不是管理市场风险，并且通过对冲减少基于会计的风险不会直接转化为更高的公司价值。原创性/价值–这不是第一个研究韩国公司对冲行为的研究，但是本研究分析的样本时间最长，采用各种方法来控制内生性问题。我们不仅研究总的外汇衍生品，还研究衍生品的类型，包括期货/远期，期权和掉期。