Effectiveness of Foreign Exchange Derivatives Usage from Non-Financial Companies: A Brazilian Perspective
- 1 Alumni - COPPEAD/UFRJ, Rio de Janeiro, Brazil
- 2 COPPEAD/UFRJ, Rio de Janeiro, Brazil
- 3 Anderson School of Management, University of New Mexico, Albuquerque, New Mexico, USA
- 4 COPPEAD/UFRJ, Rio de Janeiro, Brazil
Abstract
Objective: The present study analyses the financial statements of the Brazilian non-financial companies that are listed at the Brazilian stock market (B3), which had foreign currency indebtedness during the period of 2019, 2020 and 202 1, to understand whether the use of foreign exchange derivatives for hedging purposes have generated value or not. Methods: It was analysed the fi nancial statements and annual reports of the Brazilian non-financ ial companies that are listed at B3, to raise information about their debt in foreign currency, and to understand if they applied foreign currency derivatives for hedging purposes. After that, it was made a descriptive statistics analysis, followed by an econometric study applying the Fixed Effects and Random Effects methods, and a Hausman test to verify robustness. Results: The results of th e estimations indicate that the use of foreign currency derivatives for hedging purposes ha s a positive impact on companies’ profitability in moments of macroeconomic instability, such as the COVID-19 pandemic. Also, they in dicate that foreign currency indebtedness has a negative impact o n profitability. Contributions: The present study aim s to enhance the available literat ure regarding risk management and value creation, with evidence t hat the use of hedging techniques can improve companies’ value creation even in moments of unfavourable macroeconomic scenarios.
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