corporate governance and derivatives hedging
Date Issued
2016
Date
2016
Author(s)
Kuo, Szu-Yu
Abstract
After the Asia Financial Crisis of 1997, corporate governance has become an important issue in Asia. In 1999, OECD launched “OECD Principles of Corporate Governance” and declared that the competitiveness of Asian enterprises will lie on corporate governance. After 1998, Taiwan revises the Company Act in order to strengthen corporate governance and decrease corporation collapse due to accounting frauds. In addition to the importance of corporate governance, the hedging strategy is essential to Taiwanese companies because of the export orientation of the economy. Thus, this paper discusses these two issues: 1. The relationship between corporate governance and derivatives hedging 2. The effects of corporate governance on the relationship between derivatives hedging and stock return volatility The results of this study show that corporate governance will affect derivatives hedging. The foreign institutional ownership, cash flow right, and ¬director ownership have significant positive effects on hedge ratio. However, although corporate governance can influence derivatives hedging strategies, it does not significantly change the relationship between derivatives hedging and stock return volatility. This study contributes to the literature by examining the impact of corporate governance on derivatives hedging, and whether corporate governance affects stock return volatility through its impact on derivatives hedging.
Subjects
corporate governance
derivatives hedging
stock return volatility
Type
thesis