The Impact Of Derivatives Use On Cost Of Equity Of Chinese Nonferrous Metals Listed Company

With the implementation of diversified and international development strategies by Chinese enterprises,the exposure of risks that cannot be covered by traditional risk management methods is increasing,posing a threat to the stable investment and financing decisions of enterprises.From the perspective of financing decision-making,among the current equity financing methods that Chinese listed companies have a relative preference,in addition to the fixed costs and capital occupation costs in the implementation process,the other part is mainly derived from the risk compensation required by the market.The cost is closely related to the degree of corporate risk exposure.When companies deal with uncertain price risks and interest rate risks,financial derivatives are favored by more and more companies as important hedging tools to avoid risks,especially in the non-ferrous metal industry that is affected by both the real economy and the virtual economy.The research on the use of financial derivatives to the cost of corporate equity financing has been relatively mature abroad,but there is no unified conclusion for the research on China.Therefore,choosing a representative domestic nonferrous metal industry to explore it meets domestic actual needs.This article selects a sample of listed companies in the non-ferrous metal industry in Shanghai and Shenzhen in the Shenwan industry classification.Based on the annual report data from 2012 to 2019,it manually collects the use of each company's annual derivative instruments;estimates the company's equity based on the actual domestic OJN model Financing costs,combined with the selection of control variables in the relevant literature,comprehensively establish a panel data model to explore the impact of the use of financial derivatives on the equity financing costs of listed companies,and further consider the company's motivation for using this strategy and the endogenous issues of the panel model.The following conclusions are drawn:(1)The use of financial derivatives for hedging strategies for sample nonferrous metal companies can reduce the company's equity financing costs.With the industrywide average cost of 12.55%,the company can obtain a 1.5% cost reduction,and its effect 11.4%of this is achieved by the intermediary effect of cash flow volatility;(2)From the perspectives of corporate value and cash flow volatility,the company's motivation for using derivatives is tested,and the results show that the company's motivation for using derivatives is indeed motivated by risk aversion;(3)Selecting and After the validity is tested,the instrumental variable group is used to proxy the use variables of the derivatives in the original model,and the model is robustly tested by the two-stage least squares method.The results show that the original model does not have significant endogenous problems,and the results of the instrumental variable method still support The conclusion that the use of derivatives can reduce the cost of corporate equity financing.