Financial derivatives and firm value: What have we learned?

Despite an enormous amount of research on the relationship between financial hedging and firm performance, the literature provides so far no clear-cut findings on whether the use of derivatives results in higher firm valuation. Using a meta-analysis of 51 studies, this research explains whether the absence of a consensus is due to different country specificities and hedging types. The findings show that the use of foreign currency derivatives, alone or along with other types of derivatives, drives firm value positively. They also show that hedging presents an economic advantage for all firms, especially those from common law and developed countries.