Journal of Accounting, Finance & Management Strategy







Volume 13, Number 2, December 2018

Does Hedging Efficiency Really Matter for Firm Value Enhanced?

Manhwa Wu¹*, Paoyu Huang², Yensen Ni³*


We argue that hedging currency exposure would be an important issue for enterprises. Aside from derivatives employed as the proxy for hedging, we use the ratio, the absolute value of currency gains (losses) over operating income, as the new proxy of hedging efficiency, since we argue that currency gains (losses) should not be high for the firm able to hedge efficiently. We then reveal that this new proxy rather than derivatives employed does matter for enhancing firm value. In addition, to the best of our knowledge, this is the first paper to propose that the new proxy does matter for enhancing firm value rarely revealed and even not explored in the literature.


Keywords: Currency management, Corporate governance, Firm value.

JEL Classification: G30, G32, G34


¹ Department of Finance, Ming Chuan University, 100 Taipei, Taiwan

² Department of International Business, Soochow University, 100 Taipei, Taiwan

³ Department of Management Sciences, Tamkang University, 25137 New Taipei, Taiwan

* E-mail: ysni@mail.tku.edu.tw