Financial Hedging and Firm Performance: Evidence from Cross-border Mergers and Acquisitions

摘要

Using a sample of 1,369 cross-border acquisitions announced by Standard & Poor's 1500 firms between 2000 and 2014, we find strong evidence that derivatives users experience higher announcement returns than non-users, which translates into a US$ 193.7 million shareholder gain for an average-sized acquirer. In addition, we find that acquirers with hedging programmes have higher deal completion probabilities, longer deal completion times, and better long-term post-deal performance. We confirm our findings after employing an extensive array of models to address potential endogeneity. Overall, our results provide new insights into a link between corporate financial hedging and firm performance.