Hedging And The Use Of Derivatives: Evidence From UK Non-Financial Firms

This paper attempts to differentiate among the theories of corporate hedging by using treasury disclosures in the 1995 annual reports of the largest 400 UK companies and data collected via a survey to corporate treasurers. Univariate and multivariate logit tests indicate that firms with tax loss carryforwards, higher gearing, lower liquidity, foreign exchange exposure and larger firms are more likely to hedge. Multinomial and ordered logit regression methods demonstrate that cross-sectional variation in the extent of risk management is consistent with some of the extant hedging theory.