The economic determinants of corporate hedging: an empirical analysis of UK non-financial firms

This thesis attempts to differentiate among the theories of corporate hedging by using UK corporate level data for the first time. The UK provides a particularly valuable focus for empirical investigation since it has a large and sophisticated corporate sector. Additionally UK firms have become more exposed to financial risk because of the increasing level of debt type commitments, expanding international operations and the growth in price volatility in the world's commodities markets. Lack of a consensus on the economic effects of corporate hedging as well as the limited research on this issue in the UK intrigued the author and led to this research into whether the UK evidence supports theories that imply risk management enhances shareholder wealth. In this way the thesis contributes to an ongoing debate in the literature and provides a valuable additional case study. It provides a further contribution by giving insights into the determinants of hedging across exposure categories. One of the main contributions of this study is that the evidence presented suggests that the conflicts between the results of this study and those of previous studies focusing on the hedging of specific exposures can be explained by the treatment of other hedgers in non-hedging samples. In undertaking this analysis, a systematic empirical approach is taken which employs essentially four different econometric methodologies: a logit analysis, a multinomial logit analysis, a tobit analysis and a two step estimation process incorporating probit and truncated regression analysis

An empirical examination of the lead–lag relationship between spot and futures markets: evidence from Thailand

This study investigates whether a lead–lag relationship exists between the spot market and the futures market in Thailand during the period 2006 through 2012. In a rational, efficient market, returns on derivative securities and their underlying assets should be perfectly contempora-neously correlated. However, due to market imperfections, one of these two markets may reflect information faster. Using daily data, our results show that there is a price discovery in the Thailand futures market. We find that lagged changes in spot prices lead changes in futures prices. Our results are robust to the use of an alternative equity index. Our results show that the error correction model, which utilizes the traditional linear model, is found to be the best forecasting model. Furthermore, we find that a trading strategy based on this model outperforms the market even after allowing for transaction costs

Non-linear effect of exchange rate volatility on exports: the role of financial sector development in emerging East Asian economies

This paper empirically examines the role of financial sector development in influencing the impact of exchange rate volatility on the exports of five emerging East Asian countries - China, Indonesia, Malaysia, the Philippines and Thailand - using a GMM-IV estimation method. The results indicate that the effect of exchange rate volatility on exports is conditional on the level of financial sector development. The less financially developed an economy, the more its exports are adversely affected by exchange rate volatility. In addition, a stable exchange rate seems to be a necessary condition to achieve export promotion via a currency depreciation in these economies.East Asia, exports, exchange rate volatility, financial sector development,