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The use of corporate derivatives: Effects on firm value in the Italian market
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Alberto Tron 
, Federico Colantoni
This work is licensed under a Creative Commons Attribution 4.0 International License.
Abstract
It is an empirical question whether the use of derivatives hedging among firms actually contributes to enhancing firm performances. Despite the increasing use of derivatives by non-financial firms, existing literature still debates about their effect, especially in countries with peculiar corporate governance mechanisms. By using a sample of non-financial Italian firms listed from 2007 to 2018, this paper investigates if the use of several types (currency, interest rate, and commodity) of financial derivatives can affect the value of a company. For measuring the impact of the derivatives and in order to address any possible endogeneity problem, besides using the conventional methodologies applied by previous literature (fixed-effect regression models and system GMM estimators), we run a random forest model, a machine learning technique not yet applied before in this field, and calculate the relative importance of each independent and control variable. Differently from other European countries, findings show that the use of derivatives does not affect the firm value in the Italian market. Therefore, our results confirm the role of corporate governance mechanisms on the relationship between firm value and the use of derivatives and that their impact is country-specific.
Keywords: Derivatives, Hedging, Financial Risk Management, Corporate Decisions, Firm Value
Authors’ individual contribution: Conceptualization — A.T. and F.C.; Methodology — A.T. and F.C.; Formal Analysis — A.T. and F.C.; Data Curation — A.T. and F.C.; Writing — Original Draft — A.T. and F.C.; Writing — Review & Editing — A.T. and F.C.
Declaration of conflicting interests: The Authors declare that there is no conflict of interest.
JEL Classification: G31, G32, K22
Received: 19.07.2021
Accepted: 27.09.2021
Published online: 30.09.2021
How to cite this paper: Tron, A., & Colantoni, F. (2021). The use of corporate derivatives: Effects on firm value in the Italian market. Corporate Ownership & Control, 19(1), 55–68. https://doi.org/10.22495/cocv19i1art5
