Do investors really value derivatives use? Empirical evidence from France

Abstract

Purpose

The purpose of this paper is to examine the valuation effect of derivatives use in the French market using a sample of 250 non‐financial firms over the period 2000‐2002.

Design/methodology/approach

The approach taken is application of linear regression framework and panel data techniques.

Findings

The paper finds that the decision to use derivatives has no effect on firm valuation. However, the extent of derivatives use is associated with lower firm value. Hence, it seems that French investors do not assign a premium value to derivatives use.

Practical implications

The findings imply that managers should explain to investors that firms truly use derivatives for hedging purposes and how such a financial policy creates shareholders value.

Originality/value

It is believed that this is the first study that examines the valuation effect of derivatives use in France.

Citation

Ben Khediri, K. (2010), "Do investors really value derivatives use? Empirical evidence from France", Journal of Risk Finance, Vol. 11 No. 1, pp. 62-74. https://doi.org/10.1108/15265941011012688