Interest rate swap usage for hedging and speculation by Dutch listed non-financial firms

Lei, Haitang (2017) Interest rate swap usage for hedging and speculation by Dutch listed non-financial firms.

Abstract:This study investigates the financial characteristics of firms that influence the usage of interest rate swaps among Dutch non-financial firms to either speculate or hedge against interest rate risks, whether those financial characteristics influence the usage of interest rate swaps differently if the purpose of interest rate swaps usage differs, e.g. to hedge or to speculate, and also whether the purpose of IRS usage (hedging or speculation) influence firm values differently. The research model provided a novel way to identify hedgers and speculators by creating an index from the information from financial statements such as managements’ subjective declarations and auditors’ independent judgements on hedge accounting. Based on sample of around 119 companies non-financial Dutch listed firms in Amsterdam ex-change from 2010 to 2014, I find that the study shows a positive significant effect of firm size, leverage and a negative significant effect operating risk on IRS usage either for hedging or specu-lative reasons. It also shows that given a certain level of growth opportunities, firms with higher cash flow sensitivities to interest rate use more IRS to hedge. Empirical results show that hedgers only have significant lower size then speculators and all other financial characteristics do not in-fluence hedgers or speculators significantly differently. I found a positive influence of usage of IRS used for hedging on firm value. IRS used with higher possibility to hedge increase firm value and used with higher possibility to speculate decrease firm value. Contradictory to most of empir-ical findings, I find a significant negative impact of IRS usage on firm value.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
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