The Effects of Derivative Hedging on Firm' Financial Activity -- An Evidence from Chinese Listed Companies

In the paper, using survey data from disclosures in annual reports of the Chinese listed companies of metallurgical industry from 2007 to 2010, due to the fact of that there is the highest percentage of Chinese companies linking the decision of derivatives hedging in this industries, we find strong evidence that derivatives hedging affects the financial activity of companies including the debt leverage, dividend policy: Our result shows a positive relationship between debt leverage of companies and scale of derivatives hedging. The study also presents that companies used derivatives hedging distribute more dividends and there exist a positive relationship between the scale of the use of derivatives hedging and distribution of dividends.