Corporate reputation and hedging activities |
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Authors: | Zero Deng J Jimmy Yang |
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Institution: | College of Business, Oregon State University, Corvallis, Oregon, USA |
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Abstract: | This study examines whether corporate reputation affects derivative hedging. We posit that high-reputation firms are more likely to engage in hedging due to greater reputation costs and/or their commitment to lower financial risks. We find that high-reputation firms are more likely to engage in hedging, especially when their hedging efforts or effects are more observable to stakeholders. We also find that high-reputation firms are less likely to disclose the notional values of hedging positions and that interest rate hedging by high-reputation firms is detrimental to firm value. Our results shed light on the impact of reputational concerns on corporate risk management and disclosure policies. |
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Keywords: | corporate reputation financial hedging risk management |
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