Determinant Factors of Hedging and Speculation with Foreign Exchange Derivatives of Brazilian Private Firms

Determinant Factors of Hedging and Speculation with Foreign Exchange Derivatives of Brazilian Private Firms

• Author
• Fernando Nascimento Oliveira
• Abstract

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  This paper examines the determinant factors of hedging and speculation with foreign exchange derivatives of Brazilian private firms. We build an original database of 211,746 contracts of plain vanilla derivatives of foreign exchange from 2010 to 2020 of these firms. From these contracts, we identify that the most relevant factor that affects positively hedging is the ratio between foreign exchange exposure and total assets, while profitability and growth opportunities are the most important factors that affect negatively speculation. We also observe that many more private firms speculate rather than hedge with foreign exchange derivatives in Brazil. Our results are, in general, statistically significant and robust to different specifications and econometric techniques, including those that deal with endogeneity of regressors and measurement errors of binary dependent variables.

   

• Keywords
• foreign exchange derivatives, hedge, speculation, private firms, determinant factors
• Modality
• Comunicação oral
• Subject Area
• Finanças Corporativas e Bancárias (Corporate Finance and Banking)

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