Analysis Of The Motives And Value Effect Of Companies’ Foreign Exchange Derivatives Hedging

Since the collapse of the Bretton Woods system in 1970 s,fixed exchange rate system have replaced by floating exchange rate system.Exchange rate control policy gradually cancelled,and international economic fluctuations increased.It further exacerbated the fluctuations of exchange rate.In order to meet the needs of investors to transfer and avoid exchange rate risk,foreign exchange derivatives appeared.More and more enterprises have started to use currency derivatives to manage foreign exchange risk.However,currency derivatives is a double-edged sword,it can improve the foreign exchange risk management ability of enterprises when used properly.It can also bring huge losses when use improperly.Some companies use the foreign exchange derivatives to manage risks but suffering huge losses often happens,for example,CITIC Pacific,Air China,Shennan Electric and so on.It caused many investors into a panic when talking about the foreign exchange derivatives.but there are few articles to look for reasons: foreign exchange derivatives can be used for hedging and speculation,so enterprise is engaged in using foreign exchange derivatives hedging or speculating? How to judge? If hedging,What factors determine the matter? In the current environment,can foreign exchange derivatives hedging promote the enterprise value? So this article will study with the above problems.This paper picked some non-financial listed companies with detailed information disclosure of foreign exchange derivatives from the shanghai and shenzhen stock.The time covers 2010 to 2014.Before the empirical analysis,we distinguish the hedging and speculative enterprises to obtain the sample of hedging companies.And then according to the principle of same industry,same size and same foreign exchange exposure to choose matching samples of hedging companies.Then make a empirical analysis about the reason of listed companies using foreign exchange derivatives.It also analyze the relationship of foreign exchange derivatives hedging and enterprise value.The empirical conclusions of this paper includes:(1)The companies in China use the foreign exchange derivatives hedging to avoid exchange rate risk and maximize managers self-interest.It can not reflect the enterprise value maximize motivation.The western theory of the motives of hedging can’t offer the explanation for Listed companies that use foreign exchange derivatives hedging in China.(2)Listed companies that use foreign exchange derivatives hedging have negative correlation with enterprise value.It is not consistent with Expectation hypothesis.The main reason is that it has been in a dollar depreciation during 2010-2014,and most of the companies use foreign exchange derivatives to hedge against the dollar liabilities,it creates losses for enterprises rather than profits.So the enterprise use foreign exchange derivatives hedging led to the fall in the value of the enterprise is also justified.