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International Evidence on Financial Derivatives Usage

* † ‡
Söhnke M. Bartram , Gregory W. Brown , and Frank R. Fehle

Abstract
This paper presents international evidence on the use of financial derivatives for a sample
of 7,309 non-financial firms from 48 countries including the U.S. Across all countries,
54.3% of the firms use derivatives in general, while 35.9% use currency derivatives, 32.0%
interest rate derivatives, and only 9.2% commodity price derivatives. Firms generally use
derivatives in line with predictions from theories of shareholder value maximization. How-
ever, we also find some evidence of managers acting in their own best interest (agency
costs). Firm-specific factors related to derivatives use are very similar across different
countries. However, some factors are related to specific types of risk. Country-specific fac-
tors such as economic size, stage of development, and legal origin have explanatory power
but do not reduce the overall significance of firm-specific factors. Together these results
show that a wide range of factors determine the use of derivatives by non-financial firms
thus explaining the mixed results from studies examining primarily U.S. firms. Finally, we
examine whether derivative usage is associated with higher firm value. Surprisingly, we
find this to be the case only for firms with high interest rate exposure using interest rate
derivatives.

Keywords: Derivatives, corporate finance, risk management, hedging, international finance

JEL Classification: G3, F4, F3
This version: March 1, 2003.

*
Lancaster University, Graduate School of Management, Lancaster LA1 4YX, United Kingdom, Phone: +44
(1524)
592 083, Fax: +1 (425) 952 1070, Email: <s.m.bartram@lancaster.ac.uk>, Internet: <http://www.lancs.ac.uk/staff/
bartras1/>
†
Corresponding author. Kenan-Flagler Business School, University of North Carolina at Chapel Hill, CB
3490
McColl Building, Chapel Hill, NC 27599-3490, USA, Phone: +1 (919) 962-9250, Fax: +1 (919) 962-2068, Email:
<gregwbrown@unc.edu>, Internet: <http://intranet.kenan-flagler.unc.edu/faculty/browngr/>.
‡
Moore School of Business, University of South Carolina, Columbia, SC 29208, USA, Phone: +1 (803) 777-
6980, Fax: +1 (803) 777-6876, Email: <ffehle@moore.sc.edu>, Internet: <http://dmsweb.badm.sc.edu/fehle/>.
The authors gratefully acknowledge research funding by the Maastricht Research School of Economics of Technol-
ogy and Organizations (METEOR), as well as support by Mike Pacey, Global Reports, Standard & Poor’s Global
Rating Service and Thomson Financial in establishing the dataset. They are indebted to Yaw-heui Wang for research
assistance.
 International Evidence on Financial Derivatives Usage

Abstract
This paper presents international evidence on the use of financial derivatives for a sample
of 7,309 non-financial firms from 48 countries including the U.S. Across all countries,
54.3% of the firms use derivatives in general, while 35.9% use currency derivatives, 32.0%
interest rate derivatives, and only 9.2% commodity price derivatives. Firms generally use
derivatives in line with predictions from theories of shareholder value maximization. How-
ever, we also find some evidence of managers acting in their own best interest (agency
costs). Firm-specific factors related to derivatives use are very similar across different
countries. However, some factors are related to specific types of risk. Country-specific fac-
tors such as economic size, stage of development, and legal origin have explanatory power
but do not reduce the overall significance of firm-specific factors. Together these results
show that a wide range of factors determine the use of derivatives by non-financial firms
thus explaining the mixed results from studies examining primarily U.S. firms. Finally, we
examine whether derivative usage is associated with higher firm value. Surprisingly, we
find this to be the case only for firms with high interest rate exposure using interest rate
derivatives.
1 Introduction
The use of financial derivative contracts by non-financial corporations has grown rapidly over the
last two decades, yet to date there is little consensus regarding both how and why firms use
derivatives. Especially lacking are comprehensive data on the use of derivatives by non-financial
1
firms outside of the United States even though these firms represent the majority of users. This
paper takes a step toward filling the gap by examining the use of financial derivatives by 7,309
companies in 48 countries including the U.S.—the largest and broadest sample of firms studied to
date.

This research has four main objectives. First, we seek to document the usage of foreign ex-
change (FX), interest rate (IR), and commodity price (CP) derivatives and compare characteris-
tics of users across countries and firm type. Our results show that in many countries outside the
United States firms commonly use derivatives. Across all countries, more than half of the sample
firms (54.3%) use some type of financial derivative. More precisely, 35.9% of the firms use FX
derivatives, 32.0% interest rate derivatives, and 9.2% use commodity price derivatives. For the
2,243 U.S. firms in the sample, the rates are similar: 59.3% of firms use some type of derivative
with 30.9% using FX derivatives, 39.8% using interest rate derivatives and 15.2% using com-
modity derivatives. We find that the type of derivatives used varies across the different classes of
financial risk. For example, 28.1% of firms use forwards to hedge FX risk and 10.8% use swaps.
Usage rates are reversed for interest rate derivatives where swaps are the most popular risk man-
agement instrument (used by 28.6% of firms) and forwards are used by only 0.8% of firms. The
use of non-linear derivatives varies less across types of risk: 9.4% of firms use FX options, 7.4%
of firms use some type of non-linear interest rate derivative (e.g., option, cap, floor, and/or swap-
tion). In contrast to the low usage rates for FX and interest rate futures contracts, commodity
price risk is most frequently managed with futures (which are used by 3.1 % of firms or roughly a
third of commodity price derivatives users).

Our second objective is to use a large and diverse sample of international firms to increase
the power of tests examining the motivations for derivative use. Since prior research and anecdo-
tal evidence suggests that corporations use derivatives primarily for financial risk management

1
Sections 2 and 5.1 provide summary statistics on derivatives users. Existing research on derivative usage by non-
U.S. firms are summarized in Section 5.1.

1
 2
purposes , the extant empirical research (mostly using samples of U.S. firms) has sought to test
theories of financial risk management. For example, financial theory suggests that corporate risk
management is apt to increase firm value in the presence of capital market imperfections such as
bankruptcy costs, a convex tax schedule (Smith and Stulz, 1985), or underinvestment problems
(Bessembinder, 1991; Froot, Scharfstein, and Stein, 1993). While recent empirical studies pro-
vide some evidence in support of these theories (Nance, Smith and Smithson, 1993; Mian, 1996;
Géczy, Minton, and Schrand, 1997; Allayannis and Ofek, 2001, among others), some findings
suggest that risk management may arise from principal-agent conflicts between managers and
shareholders or additional factors not well motivated by existing risk management theory such as
earning management and speculation (Tufano, 1996; Brown, 2001; Core, Guay and Kothari,
2002).

We find that derivatives use appears consistent with some theories of shareholder value
maximization. At a fundamental level, we find strong evidence that the use of derivatives is, in
fact, risk management rather than simply speculation. For example, firms that use FX derivatives
have higher proportions of foreign assets, sales, and income and firms that use interest rate de-
rivatives have higher leverage. In line with the financial distress hypotheses, tests indicate that
derivatives users have significantly higher leverage and income tax credits as well as lower li-
quidity (as measured by quick ratios and coverage ratios). However, we also find some support
for the management incentives rationale as hedgers more frequently have stock options and mul-
tiple share classes. We document little support for the underinvestment hypothesis. The striking
result from this analysis is how similar the determining factors are across different countries.

Our third objective is to examine the use of derivatives at the country level and determine
what country-specific factors, if any, are important for explaining cross-sectional variation. We
find that hedging is more common in smaller but developed economies with less international
trade. Firms located in civil law countries with weaker creditor rights are also more likely to use
derivatives. While important, country-specific factors do not dilute the importance of firm-
specific factors.

Our fourth objective is to determine if derivative use is associated with higher firm value. A
limited amount of recent research has started to examine this important issue (Allayannis and

2
See Hentschel and Kothari (2001), among
others.

2
Weston, 2001; Schrand and Unal, 1998; Graham and Rogers, 2002). Our comprehensive sample
allows for more powerful tests regarding the relation between risk management and firm value.
Consistent with the findings of Allayannis and Weston (2001) we find some evidence that FX
derivative use by U.S. firms is associated with higher firm value. These results are fairly weak in
our later sample period and are not present in the sample of international firms. We do find strong
results indicating that interest rate risk management by firms with high leverage is associated
with elevated firm value for both U.S. and international firms. Overall, the results of our analysis
show that studying companies headquartered in the U.S. is not sufficient for understanding the
risk management practices of non-financial firms.

The remainder of the paper is organized as follows: General motivation as well as a sum-
mary of the evidence from related studies is presented in Section 2. Section 3 details the theory
and hypotheses that are tested in this study. The data are described in Section 4. Empirical results
are presented in Section 5 while Section 6 concludes.

2 Motivation and Related Literature

Studying the use of derivatives is important. While a few commodity-based (e.g., agricultural)
industries have a long history of hedging with exchange-traded derivatives, the use of derivatives
has grown rapidly since the introduction of foreign exchange and interest rate products in the
1970s. For example, Panel A of Table 1 reports data from the Bank for International Settlements
(BIS) triennial surveys showing that the FX derivatives market continued to grow rapidly in the
1990s. Specifically, daily turnover of FX forwards and swaps grew from an average of 187 bil-
3
lion U.S. dollars (USD) in 1989 to a peak of 1,206 billion USD in 1998.

While companies in the U.S. are an important part of the global derivatives market they ac-
count for a minority of derivatives turnover. Panel B of Table 1 shows the daily turnover for all
FX derivatives and (single currency) interest rate derivatives as well as the U.S. share of those
markets in 2001. U.S. firms are responsible for only about 13.7% of total FX and 18.1% of total
interest rate derivatives turnover. Examining only non-financial firms reveals that the U.S. share
is higher but still only about a quarter of turnover. In our subsequent firm-level analysis, the
number of non-U.S. derivatives users in our sample is substantially greater than the number of

3
The introduction of the Euro in 1999 is the primary reason for the decline from 1998 to
2001.

3
U.S. derivatives users (though the fraction of U.S. firms using some type of derivatives is mar-
ginally higher). As a consequence, it seems important to examine firms outside the U.S. to get a
complete picture of the use of derivatives.

While the primary users of derivatives are financial institutions such as banks, insurance
companies, and money managers, the use of derivatives by non-financial firms is considerable.
Panel C of Table 1 shows the notional value (and percentage) of outstanding FX and IR deriva-
tive contracts held by non-financial firms in 2001. The notional value of all types of FX deriva-
tives held by non-financial firms was more than 4 trillion USD in 2001. Examining values from
1995, 1998, and 2001 shows that non-financial firms have consistently held a little more than
20% of FX derivatives outstanding. In aggregate, non-financial firms are even bigger users of
interest rate derivatives—holding more than 7 trillion USD in notional value in 2001. From 1995
to 2001 usage grew rapidly (by about 75%), but because the notional value of IR derivatives held
by other users grew even more rapidly, non-financial firms’ share of the IR derivative market has
declined from 16.1% in 1995 to 9.9% in 2001. However, by any measure the combined notional
values of FX and IR derivatives held by non-financial firms in 2001 is large - exceeding the GDP
of the U.S. or the European Union.

Studying non-financial firms is also important because their motivations and strategies for
using derivatives are the least well understood. In addition, non-financial firms make up the ma-
jority of firms using derivatives since, by definition, the use of derivatives among financial firms
is concentrated in a few industries. As accounting disclosure requirements changed in the early
1990s, numerous academic studies have examined derivative usage by non-financial firms. The
majority of these studies use samples of U.S. firms primarily because of data availability: disclo-
sure is relatively good and there are many companies to study. Nonetheless, the U.S. is probably
not the best laboratory for examining derivative usage by non-financial firms. For instance, the
U.S. is among the most financially stable countries in the world so financial risk management
with derivatives may be less critical for U.S. firms. Likewise, international trade (imports plus
exports) as a percent of GDP is not particularly high for the U.S. suggesting that FX hedging (the
most studied type of risk management) may also be relatively less important for U.S. firms.

Perhaps the biggest shortcoming to the existing studies using U.S. firms is that the results,
taken as a whole, are rather inconclusive. Different studies find support for different rationales of
derivative usage. The general approach of empirical studies is to consider the neoclassical frame-

4
framework of Modigliani and Miller (1958) where financial risk management at the firm level
can create shareholder value when capital market imperfections give rise to deadweight costs
born by shareholders. (In the next section we provide a brief review of risk management theory.)

Early studies test the hedging motives of firms on the basis of survey data. For example,
Nance, Smith and Smithson (1993) study the use of derivatives by 159 large U.S. non-financial
corporations based on their responses to a questionnaire. They find that firms using derivatives
have more growth options, are larger, employ fewer hedging substitutes, have less coverage of
fixed claims, and face more convex tax functions. Mian (1996) studies a sample of over 3,000
U.S. non-financial firms after the FASB introduced new reporting requirements for derivatives.
The results support the hypothesis that hedging activities exhibit economies of scale while the
evidence is weak with respect to taxes and inconsistent with regard to hedging based on financial
distress costs. Géczy, Minton, and Schrand (1997) analyze a sample of 372 Fortune 500 non-
financial firms. They find that firms with greater growth options, tighter financial constraints,
extensive foreign exchange rate exposure and economies of scale in hedging activities are more
likely to use currency derivatives. Graham and Rogers (2002) investigate the tax incentive to
hedge and provide evidence that firms hedge to increase debt capacity (but probably not in re-
sponse to tax schedule convexity).

Other studies based on specific industries or individual firms benefit from the availability
of detailed data on the exposure and corporate hedging activities. Typically, these data allow for
calculating more precise measures of the extent of hedging. In a study of the gold mining indus-
try, Tufano (1996) finds evidence for theories of managerial risk-aversion as the use of commod-
ity derivatives is positively (negatively) related to the stock (option) holdings of managers. Tu-
fano finds little evidence that managers maximize shareholder value. Brown, Crabb, and
Haushalter (2002) also examine the gold mining industry and find evidence consistent with man-
agers changing hedge ratios as the result of speculative motives. In a study of the oil and gas in-
dustry, Haushalter (2000) finds support for the relationship between hedging and financial dis-
tress costs. On the other hand, Brown (2001) undertakes a clinical study of a U.S.-based manu-
facturer’s use of FX derivatives and finds little support for the financial distress (or other popular)
theories of risk management and instead proposes that hedging is motivated by earnings man-
agement, competitive factors in the product market, or internal contracting efficiency gains.

5
 Some studies provide evidence indicating that derivatives use reduces firms’ exchange rate
exposures (for example, Allayannis and Ofek, 2001), which presumably increases firm value.
Allayannis and Weston (2001) undertake a more direct test and find that firm value (as measured
by Tobin’s Q) is higher for U.S. firms with foreign exchange exposure that hedge it with deriva-
tives. However, Guay and Kothari (2002) estimate the cash flow implications from hedging pro-
grams for 234 large U.S. non-financial firms and find that the economic significance is small.

Other studies have examined the use of derivatives in countries besides the U.S. though
most examine just one or two countries and many rely on studies similar to the Wharton survey
of U.S. firms (see Bodnar, Hayt, and Marston, 1998). For example, Bodnar and Gebhardt (1999)
and Alkeback and Hagelin (1999) compare results from the Wharton survey of U.S. firms to
similar surveys of 126 German firms and 163 Swedish firms, respectively. These authors find
that both German and Swedish firms are more likely to use derivatives though the motivations for
derivative use vary somewhat across countries. In both cases larger firms are more likely to use
derivatives. Berkman, Bradbury, and Magan (1997) survey 79 companies based in New Zealand
and also find a greater use of derivatives than for U.S. firms, but the motivations for risk man-
agement in New Zealand appear very similar to those cited by U.S. firms in the Wharton survey.
Grant and Marshall (1997) survey firms in the United Kingdom; Bodnar, Jong, and Macrae
(2002) survey firms in the Netherlands; Downie, McMillan, and Nosal (1996) survey Canadian
firms; DeCeuster et al. (2000) survey Belgian Coordination Centres and firms; Loderer and
Pichler (2000) survey Swiss firms; Sheedy (2002) surveys firms in Hong Kong and Singapore. In
general, these studies also find higher derivative usage rates than in the U.S. especially for FX
derivatives. Of particular interest are the results of Bodnar, Jong, and Macrae (2002) who find
that institutional differences between the Netherlands and the U.S. seem to explain differences in
risk management behavior thus suggesting the possibility of important country-level effects.

To the best of our knowledge, only a couple studies have looked at derivative usage by
firms in many countries. Allayannis, Brown, and Klapper (2003) examine the use of foreign cur-
rency debt, including FX hedging, by firms in eight East Asian countries. They generally find
support for value-maximizing risk management theories. A recent paper by Lel (2002) provides
complementary evidence to this paper, as it investigates hedging theories on the basis of 124
American Depository Receipts (ADRs) from 28 countries. Results suggest that corporate hedging
has an important country-specific component, for example, that the legal environment and credi-

6
tor rights in different countries matters. Lel also finds that firm-specific factors have limited
power in explaining the probability of hedging. Studying ADRs is advantageous in terms of
common reporting requirements and quality of data. However, it comes at the cost of a relatively
small sample and a selection bias that favors the biggest and best international firms. Our sample
includes 630 ADRs so where appropriate we compare results directly. In contrast to Lel, we find
that many firm-specific factors are important, and that country-specific factors seem relatively
less important, in our larger sample of firms.

3 Theories of Corporate Derivatives Use and Hypotheses

One of the primary objectives of this paper is to investigate the rationales for corporate hedging
on an international scale. As noted previously, hypotheses tested in prior research are derived
mostly from existing theories describing the incentives for derivatives use based on such factors
as bankruptcy (financial distress) costs, taxes, the underinvestment problem, and managerial in-
centives. Below in Section 3.1 we only briefly describe these theories and predictions since many
existing papers provide excellent detailed discussions (see, among others, Géczy, Minton, and
Schrand, 1997; and Graham and Rogers, 2002). To facilitate comparison we carefully follow the
existing literature wherever possible. In Section 3.2 we develop additional hypotheses regarding
differences in derivatives use across countries. These propositions are based on measures of eco-
nomic development, financial risk, the protection of shareholder and creditor rights, legal origin
and the rule of law, accounting standards as well as transparency and disclosure of financial re-
porting in different countries.

3.1 Incentives for Derivatives Use at the Firm Level

3.1.1 Financial Distress Costs and Taxes

Cash flow volatility can lead to situations where a firm’s available liquidity is insufficient to fully
meet fixed payment obligations, such as wages and interest payments, on time. Financial risk
management can reduce the probability of encountering such states of nature and thus lower the
expected value of costs associated with financial distress (Smith and Stulz, 1985; Shapiro and
Titman, 1986; Stulz, 1996). Likewise, lowering the chance of financial distress can increase the
optimal debt-equity ratio and therefore the associated tax shield of debt (Myers, 1993; Myers,
1984; Leland, 1998). In addition, if firms face a convex tax schedule reducing the volatility of
taxable income will reduce the expected value of tax liabilities (Smith and Stulz, 1985).

7
 These theories have led previous researchers to predict that firms with higher leverage,
shorter debt maturity, lower interest coverage, and less liquidity (e.g., lower quick ratio) are more
likely to use derivatives to hedge financial risk. Preferred stock is often viewed as a type of addi-
tional leverage. Similarly, firms with higher dividend yield are likely to be more financially con-
strained since it is widely believed that cutting dividends is a negative signal of firm quality.
Firms with higher profitability and firms with a larger fraction of tangible assets are expected to
have lower financial distress costs and are thus less likely to hedge with derivatives. Since bank-
ruptcy costs are less than proportional to firm size (Warner, 1977), smaller firms should be more
likely to hedge. However, other researchers have posited (and documented) a positive relation as
large firms may realize economies of scale in implementing a risk management program. Tax
motivations for risk management have been tested empirically by employing the tax rate and in-
come tax credits as explanatory variables (Graham and Smith, 1999; Graham and Rogers, 2002).

3.1.2 Underinvestment
Risk management can also increase shareholder value by harmonizing financing and investment
policies (Froot, Scharfstein, and Stein, 1993). When raising external capital is costly (e.g., be-
cause of transaction costs), firms may underinvest. Derivatives can be used to increase share-
holder value by coordinating the need for and availability of internal funds. Conflicts of interest
between the shareholders and debtholders can also lead to underinvestment. An underinvestment
problem can occur when leverage is high and shareholders only have a small residual claim on a
firm’s assets, thus the benefits of safe but profitable investment projects accrue primarily to
bondholders and may be rejected (Myers, 1977; Bessembinder, 1991). A credible risk manage-
ment can mitigate underinvestment costs by reducing the volatility of firm value. As the underin-
vestment problem is likely to be more severe for firms with significant growth and investment
opportunities, various measures such as the market-to-book ratio, research and development
(R&D) to sales ratio, capital expenditure to sales, net assets from acquisitions to size are used for
testing the underinvestment hypothesis. Theory suggests that convertible debt can be used to
mitigate bondholder-shareholder agency conflicts, so its use may signal the existence of such
problems. Other researchers (Géczy, Minton, and Schrand, 1997) suggest that underinvestment is
likely to be most severe for highly levered firms with significant growth opportunities and thus
interact the market-to-book ratio (among others) with leverage to quantify this effect.

8
3.1.3 Management Incentives
Conflicting interests in the agency relationship between managers and shareholders may also
motivate the use of derivatives. Most senior managers have a highly undiversified financial posi-
tion because they derive substantial (monetary and non-monetary) income from their employment
by the firm. Consequently, risk aversion may cause managers to deviate from acting purely in the
best interest of shareholders (Stulz, 1984; Stulz, 1990; Mayers and Smith, 1982) by expending
resources to hedge diversifiable risk. The time horizon of managers and shareholders may also
differ because management compensation is tied to short-term accounting measures. These con-
flicts of interest can be mitigated by corporate risk management if compensation schemes appro-
priately link managers’ pay to the stock price of the firm (Han, 1996; Campbell and Kracaw,
1987; Smith and Stulz, 1985; Stulz, 1984). This suggests that the use of stock option plans in a
corporation can be a determinant of corporate hedging. Executive stock options can effectively
reduce a manager’s risk aversion and thus lower the propensity for using derivatives to decrease
4
idiosyncratic risk. Firms with multiple classes of shares often have a controlling group with su-
perior voting rights. Often the controlling group has representatives of management, thus the de-
gree of risk-aversion is more likely to affect corporate actions. Thus, the existence of multiple
share classes is expected to be positively related to the use of derivatives.

3.2 Country-Specific Determinants of Derivative Use

Recently, influential policy makers have suggested that access to derivatives can enhance macro-
economic development. For example, in a recent speech U.S. Federal Reserve Board Chairman
5
Alan Greenspan remarked, “The further development of derivatives markets, particularly in
smaller economies where idiosyncratic risk may be more difficult to hedge, will likely facilitate
greater cross-border flows and a more productive distribution of global savings.” Thus, it is im-
portant to determine what country-specific factors, if any, promote or inhibit the use of deriva-
tives especially if these factors can be influenced by policy. With this goal in mind we propose a
fairly large set of hypotheses in hopes of casting the net wide enough to identify relevant factors.

4
On the other hand, if these options are very in-the-money, the effect is likely to be more like that of straight equity
ownership. This should be positively related to corporate derivatives use as this further worsens the problem of an
undiversified position.
5
From comments at the Banque de France International Symposium on Monetary Policy, Economic Cycle,
and
Financial Dynamics, Paris, France, March 7, 2003.

9
 Casual inspection of the triennial BIS survey indicates a positive relation between the eco-
nomic size (GDP) of a country and the amount of total derivatives turnover. It is less obvious if
this relation is proportional to the size of non-financial business or applies to usage rates. Be-
cause larger economies are likely to have larger and more liquid financial markets we hypothe-
size that usage rates will be positively related to (log) GDP, ceteris paribus. On the other hand,
larger economies tend to be more stable and therefore firms based in these countries may have
less of a need for risk management. The nominal size of the economy can be a poor metric of the
stage of economic or financial development (e.g., China and France have roughly the same
GDP). Since derivatives are relatively new and sophisticated financial contracts the degree of
development may also be an important determinant of derivative use. Consequently, we hy-
pothesize that derivatives usage will be positively related to the degree of economic development
(GDP per capita).

Exposure to financial risk at the country level should also determine how commonly firms
use derivatives. We examine three variables likely to capture different aspects of financial expo-
sure. First, we hypothesize that the more open an economy (i.e., the greater the proportion of im-
ports and exports as a percent of total GDP) the more exposed firms in that country are to FX
risk. Similarly, we compute direct measures of interest rate and FX risk at the country level by
estimating the standard deviation of countries’ short-term interest rates and trade-weighted ex-
6
change rates. We expect that firms in countries with higher levels of IR and FX risk will be
more likely to use derivatives.

Additional hypotheses about the use of derivatives use by nonfinancial firms across coun-
tries can be derived from differences in the legal environments and ownership structures. To this
end, measures of shareholder rights, creditor rights, rule of law and ownership concentration ap-
pear relevant. We expect that firms are more likely to use derivatives to hedge if they are incor-
porated in countries where shareholder protection is high, as managers will want to avoid being
replaced because of poor firm performance attributable to financial risks. By the same token, high
ownership concentration implies more effective monitoring by, and possibly lower diversification
of, shareholders, which suggests more hedging at the firm level. In contrast, we conjecture that

6
We calculate these measures using quarterly data for 1999-2001.

10
firms are less likely to hedge in environments were creditor rights and law enforcement is strong,
because the associated agency costs are lower.

According to La Porta et al. (1998), shareholder and creditor protection is strongest in

common-law countries and weakest in French civil-law countries. Proxies for shareholder rights
include one share – one vote provisions, the allowance of proxy voting by mail, an inability to
block shareholders from selling before the annual meeting, cumulative voting and proportional
representation, oppressed minorities mechanisms, preemptive right to new issues, and the mini-
mum percentage of share capital required to call an extraordinary shareholder meeting. In our
analysis we utilize the La Porta et al. (1998) aggregate index of shareholder rights. Proxies for
creditor rights include restrictions for going into reorganization, no automatic stay on secured
assets, secured creditor priority, and management’s ability to participate in reorganization. To
measure creditor rights we use the aggregate index of these factors in La Porta et al. (1998).

A country’s legal environment may also affect the supply of derivatives. Derivatives deal-
ers may hesitate to enter into contracts with firms in countries where there is a high likelihood of
default. Thus we expect that firms in countries with better law enforcement will be more likely to
use derivatives. We use the La Porta et al. (1998) rule of law variable as our primary proxy for
the quality of the legal environment.

Ownership concentration at the country level may be a proxy for the importance of mana-
gerial risk-aversion. Two measures of ownership concentration are employed. The first is the
median percentage of ownership in the 10 largest nonfinancial domestic firms by the three largest
shareholders from La Porta et al. (1998). The second is the fraction of the 20 largest firms in each
country that have no controlling shareholder (holding 20% or more of the voting rights) from La
Porta et al. (1999).

4 Data
The sample is constructed by matching firms with accounting data on the Thomson Analytics
database with firms that have annual reports in English for the year 2000 or 2001 on the Global
7
Reports database. This initial screen results in 9,173 companies. We exclude corporations in the

7
Global reports (www.global-reports.com) is an online information provider of public company documents in
full- color, portable document format (PDF). While our sample represents a broad selection of international
companies, casual inspection indicates that there is a bias toward larger companies.

11
financial services industry leaving 7,467 firms. We drop an additional 158 companies for assorted
reasons, such as an unreadable annual report, resulting in a final sample size of 7,309 companies
in 48 countries.

The annual reports are searched electronically for information about derivatives use. Firms
are classified as derivatives users if their annual reports mention the use of derivatives. The pro-
cedure is implemented as an automated search with a concordancer for 36,338 expressions that
8
corporations utilize to report their use of derivatives. The list of search terms is established by
manually analyzing a subsample of 186 annual reports across all countries to identify expressions
that indicate the use of particular types of derivatives. Derivative users are classified by the un-
derlying asset (i.e., foreign exchange, interest rates, and/or commodity price) as well as by type
of derivative (i.e., forward, future, swap, option, and/or any type).

The advantages of this approach are that a large dataset can be created and the classification
is systematic. It comes at the cost of potentially adding noise to the process if the search result
leads to a wrong decision with regard to the classification of a firm. Examining search results
reveals that most firms report their derivatives use in a way that leads to several search hits. Even
so, to test the validity of the process we assigned a research assistant to classify firms as users or
non-users based on manual examination of 200 annual reports which were not used for determin-
ing the search terms. Overall, we estimate the procedure to have accuracy in excess of 95%. We
can only make an estimate because in some cases it is not clear, even after a careful reading of
the annual report, if a firm is actually using derivatives. For example, some firms state that they
“may” use derivatives. The automated procedure appears best at identifying commodity price
derivatives users and worst at identifying foreign exchange derivatives users. Unless there is
something systematically wrong with our procedure (which we are confident there is not), mis-
identifying an occasional firm as a derivatives user will simply add some noise to our analysis
and lower the power of our tests. Given the large size of our sample and we appear to misclassify
users about as frequently as non-users, this should be a minor problem. Since data on the corpo-
rate use of stock options are not readily available, we also search the annual reports information
on stock options and create a dummy variable with value one (and zero otherwise) if the annual
report contains information on stock options.

8
A full list of the search terms is available on request from the
authors.

12
 All accounting data from Thomson Analytics is in millions of U.S. dollars to be comparable
across countries. In many cases the data we analyze are ratios, so these are also largely compara-
9
ble across years. In order to eliminate outliers, the top and bottom one percent of the observa-
tions are dropped from the dataset. We also apply “logical limits” to few of our proxies to retain
the economic intuition. For example, we require the market-to-book ratio to be non-negative (but
also include a dummy for negative book value in the multivariate analysis). Appendix A provides
details on each of the explanatory variables construction, predicted signs for the tests in Section
5, mean values by country for all of the variables used in the primary analysis (and robustness
checks), and a correlation table for the variables used in the primary analysis (and the robustness
checks).

To control for systematic (e.g., reporting) differences across countries and for industry ef-
fects, we adjust variables constructed from the accounting data. We estimate regressions with
each of the accounting measures as the dependent variables and include as the independent vari-
ables country, 44 industry, and fiscal year dummy variables. We use the residuals from these re-
10
gressions as our explanatory variables. Not all variables are available for all firms so we exam-
ine alternative specifications of much of our analysis in a separate robustness section.

The classification of countries as emerging markets is based on the IFC classification (S&P,
2000). Information on the credit rating of countries consists of Standard and Poor’s sovereign
long-term rating for local currency. An investment grade dummy variable is created with value
one or zero otherwise if a country has a rating of BBB- or better. Information on countries’ aver-
age decile ranking in the Transparency and Disclosure study by Standard and Poor’s is used to
control for differences in accounting disclosure.

9
However, we also include a dummy variable for the year (2000 or 2001) in our multivariate analysis and have un-
dertaken robustness checks for all the analysis to make sure that our results are not driven by which year we exam-
ine.
10
We do this type of adjustment because it is sometimes unwieldy to include many industry dummies when we ex-
amine countries separately. Alternatives such as median adjusting by country and using industry dummy variables
(when possible) lead to very similar results.

13
5 Results

5.1 International Derivatives Usage Rates

Table 2 reports the percentages of firms using derivatives of different types by country, geo-
graphic region, and major industry grouping. Across the whole sample of 7,309 non-financial
firms, about half (54.3%) use some kind of derivative. Most common is the use of foreign ex-
change rate derivatives (35.9%), followed closely by interest rate derivatives (32.0%) with com-
modity price derivatives a distant third (9.2%). There is substantial variation in derivatives use
across countries. To illustrate, if we consider countries with at least 30 observations, only 18.2%
of Malaysian firms in the sample use derivatives while 95.6% of firms in New Zealand report
derivatives use. In contrast, usage rates across major geographic regions are not very different
ranging from a low of 46.7% for firms in the Asia-Pacific region to 58.1% for firms in both the
U.S.-Canada region and the Latin America-Caribbean region. Usage rates are significantly higher
for firms located in more developed (OECD) countries, 58.2%, versus 33.7% in non-OECD
countries. Interestingly, the usage rate for U.S. firms is significantly higher than for all non-U.S.
firms but this is almost entirely due to differences with non-OECD countries. Examining deriva-
tives use by major industry reveals that rates are highest in utility, chemicals, and fabricated
products industries and lowest in the consumer goods, construction, and miscellaneous (mostly
11
service) industries.

While these general derivative usage rates are interesting, they mask differences when de-
rivatives are categorized by type of underlying risk. U.S. and Canadian firms are the most com-
mon users of interest rate and commodity price derivatives whereas they are the least likely to use
foreign exchange derivatives. Derivative usage among non-OECD countries is lower for all types
of risk, but disparities are extreme for interest rate and commodity price derivatives where the
rates differ by nearly a factor of four. Examining derivative usage by type of exposure and indus-
try also reveals distinct patterns. As one would expect, the use of commodity price derivatives is
concentrated in a few industries such as utilities, oil, mining, steel, and chemicals. However, the
use of interest rate derivatives also varies substantially across industries with utilities having the

11
These industries correspond to the 17 industry classification of Kenneth French available
at:
http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html
In our sample, about two-thirds of the firms in the miscellaneous category are in three sub-industries (by 2 digit SIC
code): various business services (73), communication services (48), professional services (87).

14
highest usage rates (61.9%) and mining the lowest (21.3%). FX derivatives usage is somewhat
more uniform with rates in all but three industries between 30% and 50%.

Table 2 also breaks down derivative usage by type of instrument. Specifically, we consider
forwards, futures, swaps, and options separately. For interest rate derivatives, options include
12
swaptions, caps, collars, and floors. For currency risk, forwards (used by 28.1% of firms) are
the most commonly used instrument while swaps (10.8%) and options (9.4%) are much less
common. Almost no firms (1.1%) use foreign exchange futures contracts. For managing interest
rate risk, swaps are the most common instrument (28.6%) followed by options (7.3%). Less than
1% of firms use interest rate forwards or futures. In contrast to these results, firms use different
types of commodity price derivatives at roughly the same rate, from a high of 3.1% for futures to
a low of 2.1% for options. These patterns are quite robust across geographic region and OECD
membership. The same is true across industries for foreign exchange and interest rate derivatives,
but for commodity price derivatives there are apparent differences. For example, forwards are the
most common instrument in the mining industry whereas swaps are most common in the oil in-
13
dustry.

Overall, the general pattern of usage is consistent with that found in prior studies of U.S.
firms. For example, Nance Smith and Smithson (1993) find 61.5% of the 169 non-financial firms
they survey use derivatives. Géczy et al. (1997) report usage by 59.1% (for any derivative) and
41.4% (for currency derivatives) for their sample of 372 Fortune 500 firms. Note, that the per-
centage of firms that use derivatives in these studies is likely to be higher because the studies
focused on large firms, which numerous studies have found to be more likely to use derivatives.
Bodnar et al. (1998) report that 50% of the 399 non-financial firms use some form of derivatives:
42% use foreign exchange, 38% use interest rate, and 28% use commodity price derivatives. A
study of 451 firms by Howton and Perfect (1998) results in percentages of derivatives use of
61.7% for all derivatives contracts, 45.0% for FX derivatives, and 45.4% for IR derivatives. Mian
(1996) studies a larger sample of 3,022 firms and finds percentages of derivatives’ users of 25.5%
for all derivatives, 14.6% for FX, 14.5% for IR and 5.2% for CP derivatives.

12
For completeness we allow for foreign exchange and commodity price swaptions, caps, collars and floors but
these never yield usage rates greater than 0.2%.
13
Since it is not a primary focus of this paper, we leave an analysis of the choice of instrument(s) to future
research.

15
5.2 Univariate Analysis
Table 3 reports country and industry adjusted means, medians, and standard deviations of our
explanatory variables for hedgers and non-hedgers (i.e., derivative users and non-users). Also
reported are results from nonparametric Wilcoxon tests for differences in samples. Since about
30% of the firms in our sample are in the U.S., we break the results into two groups, U.S. firms
and non-U.S. firms. This helps us be sure that results are not driven simply by U.S. firms and
facilitates comparison with prior studies. We also examine results separately for general, FX, IR,
and CP derivatives users. We do not table these results to conserve space but make note of differ-
ences in the text. Since we subsequently examine the same variables in a multivariate setting, we
discuss these results only briefly.

Table 3 provides mixed support for the managerial incentives hypothesis. Firms with mul-
tiple share classes and firms using stock options are more likely to hedge. Results are generally
similar for FX and IR derivatives users but do not hold for CP derivatives users. Stronger evi-
dence supports the financial distress and tax hypotheses. General derivatives users, both in the
U.S. and internationally, have higher leverage, more convertible debt, and greater income tax
credits as well as lower quick ratios and less tangible assets. In addition, hedgers are more likely
to pay a dividend. With the exception of the income tax credits, the results are similar across
types of risk. However, some results go against the financial distress hypothesis. In particular,
hedgers are larger, more profitable (outside the U.S.), have longer debt maturity, and higher in-
terest coverage ratios. The univariate results do not generally support the underinvestment
hypothesis. Hedgers tend to have lower market-to-book ratios and capital expenditures and tend
to be less R&D intensive. Overall, these univariate results tend to hold for U.S. as well as interna-
tional firms and across types of risk. One notable exception (not tabled) is that FX derivatives
users in the U.S. have higher market-to-book ratios (a finding similar to Géczy, Minton, and
Schrand, 1997).

While it would be preferable to only include firms in our sample that are known to have fi-
nancial exposures, it is not straightforward to distinguish between firms with and without expo-
sures of different types. For example, a firm without any foreign sales or assets can have a sig-
nificant exchange rate exposure if its primary competitors are foreign firms. As a consequence,
we consider all firms in our primary analysis. However, we do make an attempt to categorize
firms as having exposures of various types. Specifically, for FX exposure we consider firms’ for-

16
eign assets, sales and income. Table 3 reports values for these variables individually. We also
create an FX exposure dummy variable that is equal to one for firms that have non-zero values of
any of the three measures. Similarly, we define dummy variables identifying (1) interest rate ex-
th
posure for firms with leverage above the 50 percentile and (2) commodity price exposure for
firms in the utilities, oil, mining, steel, and chemicals industries. Finally we create a general ex-
posure dummy variable that is equal to one if any of the FX, IR, or CP exposure variables is
equal to 1. While these measures are not perfect, the results in Table 3 show that in all cases,
hedgers are much more likely to be identified as having an exposure. In the subsequent analysis
we also consider results based only on firms identified as having exposures. The univariate sta-
tistics also indicate that hedgers have lower values of Tobin’s q, more industry segments, and are
more likely to have a foreign equity listing (e.g., ADR).

The evidence in La Porta et al. (1998) suggests that legal origin is an important determinant
of differences in shareholder and creditor rights as well as law enforcement across countries and
that this likely influences corporate financial policy. In our sample, firms in civil law countries
are more likely to be hedgers. This evidence is contrary to our predictions. However, these results
are not robust to examining specific types of risks. For example, firms in civil law countries are
less likely to use CP derivatives. Some evidence suggests that hedgers are incorporated in coun-
tries with better protection of shareholder rights. In particular, the shareholder rights index is sig-
nificantly larger for firms that use derivatives compared to those that do not though the difference
in magnitude is small and only statistically different when including U.S. firms. Creditor rights,
in contrast, are significantly lower for firms that use derivatives in all cases. It is interesting that
this difference is especially large for users of interest rate derivatives. The univariate analysis also
indicates that derivatives’ users are located in countries where law enforcement is good. Deriva-
tives users are located in countries of somewhat higher standards of accounting disclosure. We
treat this as more of a control variable than a result because it is likely that better disclosure stan-
dards increase the chance of derivatives being reported in the annual report.

Derivative users tend to be in larger economies and more developed economies as sug-
gested by the difference in usage rates between OECD and non-OECD countries. Surprisingly,
there are frequently significant differences for the country exposure variables but they generally
are opposite our predictions. For example, hedgers are less likely to be in countries with signifi-
cant levels of international trade and high levels of interest rate risk.

17
 In summary, there appear to be many differences in firm-specific characteristics between
hedgers and non-hedgers. Many but not all of these differences are consistent with theoretical
motivations for financial risk management. Examining country-level variables reveals that there
are frequently statistically significant differences between hedgers and non-hedgers, however, the
magnitude (economic significance) of the differences is often small or contrary to our expecta-
tions. This suggests that firm-specific characteristics may be more important than country-
specific characteristics in determining risk management policy.

5.3 Multivariate Analysis by Country and Risk Type

In order to look at the simultaneous effects of the different factors on the likelihood of derivatives
use, we estimate a LOGIT model. We estimate the model for a variety of samples: all countries,
all countries other than the U.S., the six individual countries with the most observations in our
sample (the U.S., United Kingdom, Japan, Germany, Canada, and Australia) and all other coun-
tries. The explanatory variables are those discussed previously and suggested by risk manage-
ment theory discussed in Section 3. We estimate similar models for all sub-samples, but since not
all variables are available for all firms (or relevant for all countries), we chose the specification
with the maximum number of explanatory variables that allows the estimation algorithm to con-
verge. We also estimate the models separately for general, FX, IR, and CP derivatives’ use.

Table 4 shows results for general derivative users. For the full sample, sufficient data are
available for 4,331 firms. The results are similar to those suggested by the univariate statistics.
Mixed support for the managerial incentives hypothesis comes from the positive relations be-
tween derivatives use and the presence of stock options and multiple share classes. These results
might both support the managerial incentives hypothesis if managers on average hold in-the-
money options and are thus using derivatives to preserve the value of their equity-like positions.
The financial distress and tax hypotheses are supported by the positive coefficients on leverage,
the dividend dummy variable, and the income tax credit dummy variable, as well as the negative
coefficient on the quick ratio and the coverage ratio. However, contrary to this theory are the
positive coefficients on debt maturity, tangible assets, and size. The full sample provides little
support for the underinvestment theory. Specifically, we find a negative relation between deriva-
tives usage and the market-to-book ratio and no or weak relations for the capex-to-sales ratio,
assets from acquisitions, or the interaction between market-to-book and leverage. Finally, we
note that firms with FX exposure are more likely to hedge.

18
 The remaining columns in Table 4 show that these results differ surprisingly little across
countries. In almost all cases where a variable is significant for the full sample, the sign of sig-
nificant coefficients in individual countries is the same. The exception is the stock options vari-
able, which has a significant negative coefficient in Japan. A few variables that are not significant
in the full sample appear to be important for individual countries. For example, profitability is
negatively related to derivative use in the U.S., but in Australia and the other countries aggregate
the relation is significantly positive. Likewise, the market-to-book interaction with leverage has a
significant positive coefficient in the U.K. and a significant negative coefficient in Germany. Be-
cause of the large number of coefficients examined, these may be chance occurrences.

Overall, these results are quite interesting because they suggest that factors determining de-
rivative usage are frequently common across different countries. We also note the apparent in-
crease in statistical power gained from examining firms across many countries. Even coefficients
that are the same sign in most sub-samples but only statistically significant in a few countries, are
statistically significant in the full sample. However, one result does appear to be country spe-
cific. The coefficient on debt maturity is only statistically significant for U.S. Firms.

Comparing the results for different types of risks also yields some noteworthy insights.
Specifically, some factors are important for one type of risk but not another. For FX derivatives
(Panel B), neither the multiple share class variable nor the debt maturity variable are significant.
More striking is that the coefficient on leverage (which for general derivative use was significant
in many cases and always positive) is never statistically significant. In contrast, for the interest
rate derivatives (Panel C) the coefficients on the debt maturity and leverage variables increase
significantly in magnitude, and in the case of convertible debt, switch from insignificant to sig-
nificant. These findings are intuitive if, as seems plausible, these variables are associated with a
greater need for interest rate risk management. Somewhat surprising is that the coefficient on
tangible assets is no longer positive given the well documented role of hard assets in explaining
capital structure. For interest rate derivatives, the multiple share class variable is also insignifi-
cant for most countries. A smaller set of factors is significant in the regression for commodity
price derivatives’ usage (panel D). Similar to the other exposure classes, the coverage ratio, lev-
erage, the dividend dummy variable, size, and income tax credits are all significant. However, as
compared to the regression for general derivatives use, multiple share classes, stock options, the
market-to-book ratio, debt maturity, and the quick ratio are no longer significant. Unique to

19
commodity price exposure are significant relations between derivatives use and both assets from
acquisitions and convertible debt though these results are not very robust across individual coun-
tries.

As noted, the results in Table 4 are from estimations using all firms with sufficient data.
We repeat the estimations (results not tabled) using only firms defined as having exposures. For
example, we do the estimation for FX derivatives users only with firms that have foreign assets,
sales, or income. For general derivative users and FX derivative users the results are nearly iden-
tical for the full sample of firms. The only coefficient that changes from insignificant to signifi-
cant (or vice versa) is the insignificant coefficient on the income tax credit dummy for firms with
FX exposure (Panel B) becomes significantly positive at the 1% level. For interest rate and
commodity price derivatives there are more differences though they mostly involve changes in
statistical significance. For IR derivatives, market-to-book, leverage (the conditioning variable),
and the quick ratio lose significance at the 5% level whereas asset tangibility and the interaction
between leverage and market-to-book become significantly negative. For CP derivatives the dif-
ferences are greatest probably because the subsample (defined by industry) is much smaller than
the full sample, 576 firms compared to 4,331. Stock options, capital expenditures, the quick ratio
and preferred stock all become significant at the 5% level (each retaining its sign from Panel D),
but assets from acquisitions, the coverage ratio, the dividend yield, and convertible debt dummy
all turn out to be insignificant. Overall, examining only the firms most likely to have a signifi-
cant exposure appears to strengthen the results overall at least for the multi-country samples.
Results for individual countries also seem robust in that the signs and approximate magnitudes of
coefficients are very stable. The exception is commodity price derivatives whose use appears to
be motivated by some different factors for firms in industries we identify as likely to have CP
price exposure.

Together these findings suggest that both common and unique factors motivate risk man-
agement for different types of exposures. Unfortunately, financial theory rarely distinguishes
between types of risk, so interpretation of the differences is difficult. The results are surprisingly
similar across sub-samples and many are consistent with theoretical predictions, but the conclu-
sion are not supportive of any one theory entirely. While not a formal theory, it appears that the
findings are broadly consist with the notion of more financially sophisticated companies using
derivatives more frequently. Revisiting the first column in Table 4, stock options, multiple share

20
classes, longer debt maturity, more leverage, foreign business ventures, large size, low quick and
coverage ratios, etc. are all characteristics of what one might (somewhat ambiguously) consider
urbane financial policy.

5.4 Multivariate Analysis of Country Factors

In order to test the relation between derivatives use and country-specific factors, we estimate two
types of models. The first is a by-country regression with usage rates as the dependent variables.
The second is a LOGIT model using the full sample of firms that includes the firm-specific fac-
tors discussed above as well as country-specific variables.

In the by-country OLS regressions we limit the analysis to countries where we have 10 or
more observations resulting in a maximum of 40 countries. We include average levels of some
unadjusted firm variables that were consistently significant in the firm-level analysis in table 4.
Since the number of observations is limited we keep these to a minimum by focusing only on
leverage, the quick ratio, dividend yield, and size. As discussed in section 3.2 we examine vari-
ables measuring civil law, shareholder rights, creditor rights, GDP, GDP per capita, international
trade (exports plus imports as a percent of GDP), FX risk, and IR risk. We consider a variety of
alternative specifications to judge robustness and manage the trade-off between variable inclusion
14
and sample size. Results from the estimation are presented in Table 5.

Surprisingly, the averages of firm-specific variables are not consistently significant ex-
planatory variables for the fraction of firms using derivatives in the countries we examine. In
countries with a legal system based on civil law a significantly lower fraction of firms use deriva-
tives. This may be because of the generally weaker rights of creditors (i.e., derivative counter-
parties) in the case of a settlement dispute or other higher costs of contracting in a civil law sys-
tem. In this analysis neither shareholder rights nor creditor rights are significant explanatory
variables. In contrast, the size of the economy (log of GDP) is negatively related to frequency of
derivative use in most specifications. This is consistent with the hypothesis that firms in larger
economies tend to face lower levels of overall financial risk and therefore are less likely to need
derivatives for risk management. Also consistent with our prediction is the (generally signifi-
cant) positive coefficient on GDP per capita suggesting that firms in more developed economies

14
In subsequent drafts we hope to have data for all variables for all
countries.

21
have better access to derivatives. A puzzling result is that frequency of derivative use appears
negatively related to the level of international trade. Another surprising result is that hedging
rates are not related to our measures of either FX risk or IR risk.

A limitation to these types of regressions is the low statistical power because of the neces-
sarily limited number of observations. In addition, important differences across countries are ei-
ther roughly controlled for (e.g., firm size) or ignored altogether (e.g., differences in industry
mix). For these reasons we also augment the analysis presented in Table 4 by including country-
specific variables. The results are presented in Table 6. Since companies based in the U.S. con-
stitute about a third of the sample, we also examine results excluding the U.S. firms.

We first point out that adding these country variables has little effect on the coefficients of
the firm-specific variables. More often than not the magnitude of coefficients and the level of
significance increases for these factors. This confirms that country-factors alone do not deter-
mine which firms are likely to use derivatives and that the results discussed in Table 4 are robust
to any of these country factors that are important. Examination of the coefficients on the country-
factors themselves reveals that the civil law variable is negative and significant, indicating that
firms in common law countries are more likely to use derivatives. The role of shareholder rights
appears less important—the index is only significant in one specification. In contrast, the index of
creditor rights is consistently negative indicating that derivative usage is more common in coun-
tries with weaker creditor rights.

Consistent with the results in the by-country regressions we find a positive relation between
an economic size and hedging and a negative relation between GNP/capita and hedging. So, all
else the same, firms in less developed countries are less likely to use derivatives than their coun-
terparts in more developed countries. This is despite the fact that hedging is likely to be more
valuable for firms in these countries because of higher risk and higher financial distress costs.
Thus, if this indicates the existence of barriers to the derivatives market for firms in these coun-
tries (especially for smaller firms less likely to be in our sample), welfare gains may be possible
by facilitating access to the derivatives market.

Also similar to the by-country regressions is the puzzling negative relation between interna-
tional trade and derivative usage. In results not tables here we find that this result holds for both
exports and imports separately so it is unlikely to be a statistical fluke. We offer one (wild) con-
jecture that may explain this result. Since international trade is so persistent it may be that firms

22
in these countries devised risk management techniques that do not utilize derivatives before the
widespread availability of derivatives and that these practices persist. We hope to examine this
finding in more detail in subsequent drafts. The control variable for accounting disclosure is
positive and significant. This is not surprising as better accounting practices include the reporting
of derivatives use, which is the basis of classification for the model. Nevertheless, it is notewor-
thy that the results change very little when controlling for these differences in accounting stan-
dards across countries. Overall, the results are robust to the exclusion of U.S. firms from the
sample.

5.5 Derivative use and Firm Value

The last question we examine concerns the relation between derivatives use and firm value. Al-
layannis and Weston (2001) find that U.S. firms with foreign exchange exposure that use FX
derivatives have higher firm value (as measured by estimates of Tobin’s Q). Likewise, in a sam-
ple of U.S. firms Graham and Rogers (2002) find that hedging increases the debt ratio by 3% and
thus the capitalized value of the incremental tax shield by 1.1% of the market value of assets. In
this section we undertake an analysis similar to Allayannis and Weston but examine firms from
15
many countries as well as different types of derivatives use. Our tests are substantially more
powerful because we have many more firms and we do not suffer from the problem that value is
likely to be related to exchange rate realizations. Specifically, Allayannis and Weston find that
their results are strongest in years when the U.S. dollar appreciates against other currencies.
These effects should wash out in our large international sample since one countries appreciating
currency is another countries depreciation currency.

Table 7 shows univariate tests of the relationship between Tobin’s Q and derivatives use.
We use the ratio of the market value of the firm to the book value of total assets as a measure of
Tobin’s Q. Alternatively, the ratio of the market value of the firm to total sales is used for robust-
ness tests. Mean, median and nonparametric Wilcoxon tests are employed to assess differences
between hedgers and non-hedgers, separately for firms with and without exposure. We follow
Allayannis and Weston in separating firm by exposure since they hypothesize and find evidence
that valuation differences are concentrated in firms with (FX) exposure. In our sample, the rela-

15
In subsequent drafts we plan to undertake an analysis similar to Graham and
Rogers.

23
tion between firm value and general derivatives’ use is rather mixed, both for U.S. and non-U.S.
firms (Panel A). The results are quite different when categorizing firms by types of exposure. For
example, U.S. firms defined as having some type of exposure (Exposure = 1) have a slightly
higher Tobin’s Q but for non-U.S. firms the result is reversed. Strangely, firms less likely to have
an exposure (Exposure = 0) appear to have a more consistent value gain from hedging though the
results are weak. For FX and CP exposure, the few significant results show a lower firm value for
hedgers. In contrast, for IR exposure the only significant results indicate a higher firm value for
hedgers. In general these results do not appear to depend much on whether firms are in the high
or low (0 or 1) exposure grouping.

To try and clarify the results we examine firms by type of derivative use. Results for FX de-
rivatives users in Panel B show a consistent positive association between derivatives use and
Tobin’s QI for U.S. firms, which is consistent with Allayannis and Weston. However, the relation
tends to be reversed for firms outside the U.S. For interest rate derivatives users (Panel C) we
find systematically higher firm value for all firms in the sample except international firms with
low IR exposure. In contrast, firms have higher Tobin’s Q if they do not use commodity price
derivatives.

These results cast some doubt on the notion that hedgers consistently have higher firm
value. However, it could be that other factors known to influence firm value or the use of deriva-
tives drive these results. Consequently, we further examine the relation between derivatives use
and firm value in a multivariate setting by estimating OLS regressions with Tobin’s Q as the de-
pendent variable. We use the log of total assets to control for firm size and the ratio of total debt
to control for effects of financial leverage on firm value. If firms are restricted with regard to
their access to financing, they are subject to valuable discipline which capital markets impose on
managers’ investment decisions. As a result, capital constrained firms may have high Qs as they
are forced to undertake only positive NPV projects (Lang and Stulz, 1994; Servaes, 1996). Thus
we include a dummy variable with value 1 if the company has paid a dividend (and 0 otherwise)
as a proxy for the availability of internal funds for investment projects.

Firm profitability is expected to have a positive impact on the valuation of a company and
is controlled for by the return on assets. Since firms with large growth opportunities are more
likely to use derivatives (Froot, Scharfstein, and Stein, 1993) and since growth opportunities are
related to firm value (Myers, 1977), we control for investment growth with the ratios R&D to

24
sales and capital expenditures to sales. Industrial and geographic diversification has been shown
to impact firm value as well. In particular, Berger and Ofek (1995), Lang and Stulz (1994) and
Servaes (1996) present empirical for a discount of conglomerate diversification. We control for
industrial diversification with the number of business segments (SIC codes) that make up the
company’s revenue and a dummy variable with value 1 if the firm operates in more than one
segment (and 0 otherwise). Similarly, there may be a discount or premium for operating in sev-
eral countries (see Coase, 1937; Dunning, 1973; Morck and Yeung, 1991; Bodnar, Tang and
Weintrop, 1997). Including the ratio of foreign sales to total sales in the regression controls for
the impact of geographic diversification, since it indicates operations in more than one country.
All regressions also include a year dummy and a dummy variable for negative book values.

Results of these multivariate tests of are presented in Table 7. With regard to the relation
between corporate hedging and firm value, there is some support for a positive value effect of
general derivatives use but only for firms without exposure (Panel A). Moreover these results are
concentrated among U.S. firms. Examining results by type of derivative use again reveals incon-
sistent valuation effects. The coefficients on exchange rate derivatives (Panel B) and commodity
price derivatives (Panel D) are never significantly different from zero. To the contrary, the coef-
ficients on IR derivatives (Panel C) are always positive and usually statistically significant for
firms we define as having high interest rate exposure. These results are similar for both U.S. and
international firms. The magnitude of the coefficients suggest that investors reward users of in-
terest rate derivatives with a hedging premium of between 4.1% and 8.8% of firm value depend-
ing on the specification (sub-sample).

We note that these regression appear well specified as many of the control variables are
significant and have the expected sign. Size, leverage and dividends have significant negative
coefficients, while geographic diversification, R&D and capital expenditures have a positive im-
pact on value. Return on assets, however, switches signs between firms with and without expo-
sure for several risk types. We have also repeated the analysis using the ratio of market value to
sales as an alternative proxy for Tobin’s Q as well as employing the log of each measure. The
results are generally robust to these substitutes, in so far as the only consistent valuation effects
are for firms with high interest rate exposure using interest rate derivatives.

Overall the results are mixed in regard to the impact of hedging on firm value. Broader use
of derivatives is not consistently related Tobin’s Q, however there does appear to be a significant

25
valuation effect for interest rate derivatives. While we do not have an explanation for the latter,
there are reasons why we would not expect to observe an effect in general. First, if firms gener-
ally undertake an optimal risk management policy (whether it involves derivatives or not), there
should not be a premium for using derivatives. Alternatively, if the model is misspecified or has
low power we may not obtain reliable coefficient estimates. In subsequent drafts we plan to un-
dertake additional robustness checks though we note that as compared to other studies our analy-
sis contains similar control variables and more observations.

6 Summary and Conclusion

While previous empirical studies have provided evidence on the use of financial derivatives by
U.S. non-financial firms, less is known about the risk management practices in other countries.
Since it is likely that firms outside the U.S. face higher levels of financial risk and are known to
be substantial users of derivatives this represents a major gap in the finance literature. Our analy-
sis takes a step toward filling this breach by providing comprehensive evidence on the use of de-
rivatives by 7,309 companies in 48 countries. We find that derivative use, while varying some-
what by country and industry, is widespread across both the developed and developing world.
Overall international derivative usage rates are fairly similar to those in the U.S.

While we are not able to precisely pin down the theoretical motivations for derivative use,
we do find that it is related in a surprisingly systematic way to firm-specific characteristics, some
of which are consistent with economic rationales for financial risk management. In particular,
univariate and logit tests show that firms that use derivatives have significantly longer debt ma-
turity, leverage, size, lower quick ratios and current ratios, less tangible assets, and higher divi-
dend yields. With regard to management incentives, the results indicate that the fraction of firms
with multiple share classes and stock options is higher among derivatives’ users. There is also
support for the tax hypothesis, as more hedgers have income tax credits. For country-specific
factors, there is evidence that hedgers are more likely to be in smaller but more developed coun-
tries with lower levels of international trade as well as in countries with worse creditor rights pro-
tection. Finally, we find limited evidence in support of prior research that FX derivative use by
U.S. firms is associated with higher firm value. However, we find strong evidence indicating that
interest rate risk management is associated with higher firm value for both U.S. and international
firms. We estimate the interest rate hedging premium to be 4.1% - 8.8% of firm value signifi-
cantly more than estimates from other studies.

26
 In sum, the results of this paper show that studying companies headquartered in the U.S. is
not sufficient for understanding the risk management practices of non-financial firms. While
many of the firm-specific factors that determine derivative usage are common across countries
there are important country-specific factors as well. In addition, prior results concerning the ef-
fect of hedging on firm value do not appear to hold in our sample of international firms. If the
suppositions of policy makers are correct and the use of derivatives has important macroeco-
nomic welfare implications, it will be important for subsequent research to explore in greater
detail the findings from this broad survey.

27
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31
 Table 1: Aggregate Data on Derivatives Usage from BIS Surveys
This table reports statistics for derivatives usage derived from the Bank for International Settlements (BIS)
Triennial Surveys. All values are in billions of U.S. dollars. The tables in the 2001 BIS survey with the cor-
responding data are as follows: Panel A, Table E-36; Panel B, Tables E-8, E-9, E-10, and E-11; Panel C,
Tables E-49 and E-50.

Panel A: Daily Turnover in Foreign Exchange Forwards and Swaps

1989 1992 1995 1998 2001

Forward Contracts 22 70 115 154 164
FX Swaps 165 457 777 1,052 933
Total 187 527 892 1,206 1,097

Panel B: Daily Derivatives Turnover Attributed to U.S. Firms in 2001

Number of All Types of Non-Financial

Countries Counterparties Firms Only
Foreign Exchange
Derivatives
All Countries 47 1,342 427
U.S. Only 184 98
U.S. Percent of Total 13.7% 23.0%
Interest Rate Derivatives
All Countries 37 812 25
U.S. Only 146 7
U.S. Percent of Total 18.1% 28.3%

Panel C: Notional Values of Derivatives Outstanding with Non-financial Firms

Foreign Exchange Interest Rate

1995 1998 2001 1995 1998 2001
Forwards* 1,789 2,673 2,524 321 564 843
Swaps 798 688 1,215 3,121 4,113 5,059
Option Sold 292 892 340 505 862 1,052
Options Bought 257 720 378 351 628 576
Total: Non-financial Firms 3,136 4,973 4,457 4,298 6,167 7,531
Total - All Types, All Firms 13,095 22,055 20,435 26,645 48,124 75,813
Non-financial Percent of Total 23.9% 22.5% 21.8% 16.1% 12.8% 9.9%
*Includes FX swaps for FX derivatives

32
 Table 2: Summary Statistics of Derivatives Use
The table shows summary statistics of derivatives use by country, region, industry, and for all firms. In particular, it presents the number of firms and the percentage
of firms using derivatives. Separately for foreign exchange rate derivatives, interest rate derivatives and commodity price derivatives, the percentage of firms using
derivatives in general and a particular instrument (forward, future, swap, option) is shown.

_Fore ign Exch ange Deriv ativ es Int erest Ra te Der ivat ives_ Commodity Pri ce Der ivat ives _
Fir ms User Gen eral Forw ard Future Swap Opti on Gene ral Forwa rd Future Swap Option Gener al Forward Future Swap Option
ƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ
Arg enti na 11 54.5 54.5 9.1 27.3 18.2 0.0 36.4 0.0 0.0 36.4 27.3 18 .2 0.0 0.0 18 .2 18.2
Aus tral ia 303 59.7 44.2 40.6 0.7 8.6 16 .2 41.3 3.0 1.7 38.6 14.9 12 .9 7.9 2.3 3.6 4.3
Aus tria 44 47.7 43.2 18.2 9.1 18.2 22 .7 22.7 0.0 0.0 20.5 9.1 6.8 0.0 2.3 4.5 2.3
Bah amas 1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Bel gium 65 41.5 21.5 4.6 1.5 7.7 9.2 21.5 0.0 0.0 20.0 1.5 4.6 1.5 0.0 3.1 0.0
Ber muda 4 75.0 50.0 50.0 0.0 0.0 25 .0 50.0 0.0 0.0 50.0 0.0 0.0 0.0 0.0 0.0 0.0
Bra zil 19 42.1 31.6 15.8 0.0 15.8 10 .5 10.5 0.0 0.0 5.3 5.3 5.3 0.0 0.0 0.0 0.0
Can ada 599 53.6 34.1 25.2 0.5 7.5 7.5 26.2 0.5 0.0 23.9 3.2 16 .7 6.7 2.7 5.0 5.5
Cayman Isla nds 1 100.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Chi le 14 78.6 50.0 28.6 7.1 21.4 7.1 35.7 0.0 0.0 35.7 7.1 7.1 0.0 0.0 0.0 7.1
Chi na 36 19.4 8.3 8.3 0.0 2.8 0.0 5.6 0.0 0.0 5.6 0.0 5.6 0.0 5.6 0.0 0.0
Cze ch Repub lic 23 17.4 8.7 8.7 0.0 4.3 4.3 13.0 0.0 0.0 13.0 0.0 0.0 0.0 0.0 0.0 0.0
Denmark 88 71.6 36.4 20.5 1.1 11.4 13 .6 22.7 2.3 1.1 21.6 5.7 4.5 0.0 1.1 2.3 1.1
Egy pt 1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Fin land 105 63.8 55.2 35.2 5.7 19.0 25 .7 38.1 5.7 5.7 30.5 18.1 7.6 1.0 2.9 1.0 2.9
Fra nce 162 59.9 45.1 25.9 4.3 22.8 24 .7 41.4 0.6 1.9 36.4 13.6 3.1 0.0 1.2 1.2 0.6
Germany 412 37.1 29.1 12.9 5.3 10.7 13 .1 21.4 0.2 1.2 17.2 9.5 4.1 1.0 1.7 0.5 0.5
Gre ece 19 10.5 10.5 5.3 0.0 5.3 5.3 10.5 0.0 0.0 10.5 0.0 5.3 0.0 5.3 0.0 0.0
Hong Kong 339 22.1 17.4 13.0 0.9 3.5 1.2 5.9 0.0 0.0 5.0 1.5 0.0 0.0 0.0 0.0 0.0
Hun gary 14 28.6 21.4 14.3 0.0 0.0 14 .3 7.1 0.0 0.0 7.1 0.0 7.1 0.0 0.0 7.1 0.0
Ind ia 44 61.4 25.0 20.5 0.0 6.8 0.0 11.4 0.0 0.0 11.4 0.0 2.3 0.0 2.3 0.0 0.0
Ind ones ia 9 33.3 33.3 33.3 0.0 11.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Ire land 51 84.3 68.6 62.7 0.0 25.5 9.8 49.0 2.0 2.0 45.1 7.8 11 .8 5.9 2.0 3.9 3.9
Isr ael 68 42.6 35.3 25.0 0.0 0.0 16 .2 8.8 0.0 0.0 5.9 2.9 1.5 0.0 1.5 0.0 0.0
Ita ly 100 51.0 29.0 21.0 2.0 14.0 5.0 28.0 3.0 0.0 23.0 4.0 3.0 0.0 0.0 2.0 0.0
Jap an 364 75.0 60.2 51.1 0.0 31.6 17 .3 59.6 0.8 0.5 58.2 14.3 9.6 2.7 3.8 1.4 1.6
Jor dan 1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Kor ea, Repu blic of 25 60.0 40.0 32.0 8.0 16.0 8.0 20.0 0.0 0.0 20.0 0.0 8.0 4.0 0.0 0.0 4.0
Lux embourg 11 63.6 54.5 45.5 0.0 9.1 18 .2 27.3 0.0 0.0 18.2 9.1 9.1 0.0 9.1 0.0 0.0
Mal aysia 296 18.2 11.8 9.8 0.0 1.4 1.4 4.7 0.3 0.0 3.7 1.4 1.7 0.0 1.7 0.0 0.0
Mex ico 39 59.0 38.5 23.1 5.1 7.7 12 .8 38.5 2.6 0.0 35.9 0.0 12 .8 2.6 5.1 2.6 2.6
Net herl ands 135 53.3 40.7 23.0 1.5 18.5 14 .1 33.3 2.2 0.0 27.4 8.9 3.0 0.0 0.7 0.7 0.0
New Zea land 45 95.6 73.3 68.9 0.0 22.2 37 .8 77.8 2.2 0.0 75.6 28.9 17 .8 2.2 0.0 11 .1 8.9
Norway 86 62.8 40.7 29.1 3.5 18.6 16 .3 26.7 0.0 1.2 23.3 5.8 5.8 2.3 2.3 0.0 1.2
(continued)

33
 Table 2: Summary Statistics of Derivatives Use (continued)

_Fore ign Exch ange Deriv ativ es Int erest Ra te Der ivat ives_ Commodity Pri ce Der ivat ives _
Fir ms User Gen eral Forw ard Future Swap Opti on Gene ral Forwa rd Future Swap Option Gener al Forward Future Swap Option
ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒ
Peru 2 100.0 50.0 50.0 0.0 50.0 0.0 0.0 0.0 0.0 0.0 0.0 100 .0 50.0 0.0 0.0 100.0
Phi lipp ines 14 57.1 50.0 28.6 0.0 21.4 0.0 21.4 0.0 0.0 21.4 0.0 7.1 0.0 0.0 7.1 0.0
Pol and 14 35.7 28.6 21.4 0.0 21.4 21 .4 14.3 7.1 0.0 7.1 7.1 0.0 0.0 0.0 0.0 0.0
Por tugal 6 66.7 50.0 16.7 0.0 33.3 16 .7 33.3 0.0 0.0 33.3 0.0 0.0 0.0 0.0 0.0 0.0
Sin gapo re 226 45.6 36.3 34.1 0.0 7.1 3.1 13.7 0.4 0.0 9.7 4.4 1.8 0.0 0.0 1.3 0.0
Sou th Africa 58 69.0 53.4 46.6 0.0 8.6 15 .5 36.2 0.0 0.0 31.0 5.2 15 .5 8.6 5.2 0.0 3.4
Spa in 29 55.2 20.7 13.8 3.4 10.3 13 .8 34.5 3.4 0.0 34.5 10.3 24 .1 3.4 6.9 6.9 6.9
Swe den 143 52.4 22.4 12.6 2.1 8.4 8.4 14.7 2.1 1.4 11.9 2.8 4.9 0.7 1.4 0.7 1.4
Swi tzer land 124 69.4 59.7 45.2 4.0 14.5 21 .8 40.3 4.0 0.0 33.1 6.5 4.8 2.4 0.8 0.0 0.8
Tha iland 26 69.2 53.8 30.8 0.0 34.6 0.0 19.2 0.0 0.0 19.2 0.0 0.0 0.0 0.0 0.0 0.0
Tur key 3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Uni ted King dom 885 60.7 48.1 43.2 0.0 17.2 7.9 35.7 0.2 0.1 31.4 10.6 3.7 1.1 1.4 1.4 0.6
Uni ted Stat es 2243 59.3 30.9 25.5 0.2 6.2 6.8 39.8 0.5 0.3 35.8 6.8 15 .2 3.6 6.2 4.9 3.0
Ven ezue la 2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

US & Canada 2842 58.1 31.5 25.4 0.3 6.5 6.9 36.9 0.5 0.2 33.3 6.1 15 .5 4.3 5.5 4.9 3.5
Eur ope 2519 55.1 40.8 29.5 2.3 15.3 12 .5 30.6 1.2 0.8 26.3 9.0 4.5 1.0 1.5 1.3 0.8
Asia & Paci fic 1727 46.7 35.3 30.4 0.4 11.8 8.5 26.8 0.9 0.4 25.1 7.5 5.6 2.1 1.7 1.4 1.4
Afr ica/ Midd le East 128 53.9 43.0 34.4 0.0 3.9 15 .6 21.1 0.0 0.0 17.2 3.9 7.8 3.9 3.1 0.0 1.6
Lat in Amer. /Carib. 93 58.1 39.8 21.5 6.5 12.9 9.7 30.1 1.1 0.0 28.0 5.4 11 .8 2.2 2.2 3.2 6.5
OECD 6137 58.2 38.0 29.7 1.2 11.9 10 .6 36.1 0.9 0.5 32.4 8.3 10 .5 3.0 3.5 3.1 2.4
Non-OECD 1172 33.7 24.8 19.8 0.6 5.4 3.3 10.2 0.2 0.0 8.4 2.5 2.5 0.5 1.0 0.5 0.6
Uni ted Stat es 2243 59.3 30.9 25.5 0.2 6.2 6.8 39.8 0.5 0.3 35.8 6.8 15 .2 3.6 6.2 4.9 3.0
Non -US 5066 52.1 38.2 29.3 1.4 12.9 10 .6 28.5 0.9 0.5 25.4 7.6 6.6 2.2 1.7 1.8 1.7

Aut omob iles 166 63.3 43.4 32.5 1.8 16.9 9.6 43.4 0.6 0.6 39.8 9.0 6.0 2.4 1.2 1.2 0.0
Chemica ls 175 74.3 56.6 45.1 1.7 17.7 14 .9 49.1 1.7 0.6 46.3 8.6 17 .1 4.6 5.1 3.4 4.0
Clo thing 127 62.2 44.1 33.1 1.6 8.7 12 .6 31.5 0.0 0.0 26.8 4.7 6.3 0.0 3.9 2.4 0.8
Con stru ction 443 53.0 32.1 22.1 0.7 14.2 7.4 34.5 1.1 0.5 31.4 7.9 6.5 0.7 1.8 3.2 0.9
Consumer Goods 279 50.2 37.3 28.7 0.7 13.6 15 .1 31.2 1.8 1.4 27.6 7.5 2.9 0.4 1.4 0.4 1.1
Dur ables 215 52.6 41.9 33.5 1.4 8.4 12 .6 28.8 0.9 0.5 25.6 4.7 6.0 0.5 1.9 1.9 0.0
Fab r. Produ cts 48 75.0 60.4 43.8 2.1 25.0 10 .4 47.9 2.1 0.0 37.5 14.6 10 .4 6.3 2.1 0.0 2.1
Food 353 65.2 43.9 32.3 1.4 18.1 11 .9 45.9 2.5 1.4 42.5 10.2 15 .9 3.7 12.5 2.5 3.1
Machine ry 912 59.6 46.6 39.7 1.4 8.7 12 .0 28.6 0.7 0.1 25.0 6.3 3.3 1.0 0.9 0.4 0.2
Min es 240 54.6 34.2 29.2 0.0 6.3 12 .1 21.3 0.4 0.0 17.5 6.7 34 .2 25.0 3.8 2.5 16.3
Mis cell aneo us 2908 44.4 28.2 22.7 0.8 7.4 7.0 24.7 0.4 0.4 21.6 6.5 2.8 0.4 0.7 0.5 0.3
Oil 280 66.4 32.1 21.8 1.4 11.1 8.9 37.5 1.4 0.4 34.3 6.1 43 .9 7.1 14.6 24 .6 11.1
Ret ail 409 53.8 30.3 24.0 0.7 8.8 7.1 34.0 0.2 0.5 29.8 7.1 3.4 0.7 1.0 0.5 0.0
Ste el 164 66.5 48.2 42.1 1.8 15.2 11 .6 40.2 0.6 0.0 37.2 7.9 29 .3 14.0 12.8 3.7 2.4
Tra nspo rtat ion 354 65.5 46.9 35.0 1.1 17.2 11 .6 46.3 1.1 0.3 43.5 11.0 10 .7 1.7 2.0 4.2 2.0
Uti liti es 236 80.1 39.4 22.0 2.1 27.1 9.7 61.9 2.1 0.8 58.9 14.0 41 .9 10.2 16.9 18 .2 14.0

All fir ms 7309 54.3 35.9 28.1 1.1 10.8 9.4 32.0 0.8 0.5 28.6 7.3 9.2 2.6 3.1 2.7 2.1

34
 Table 3: Univariate Tests of Derivatives Use
The table shows the number of observations (N), the mean, median and standard deviation of different variables for hedgers and non-
hedgers. The last column presents p-values of Wilcoxon rank sum tests. Panel A refers to variables for incentives of hedging. Panel B
lists proxies of exposure. Panel C presents country-level characteristics of the legal origin. Panel D specifies variables of shareholder
right protection. Panel E reports variables of creditor right protection. Panel F lists proxies of law enforcement. Panel G reports meas-
ures of ownership concentration, and Panel H presents control variables. Panels A and B distinguish between U.S. firms and interna-
tional firms, whiles Panels C to H report results including and excluding U.S. firms.

_Hedger_ Nonhedge r _Tests

Va riab le N Mean Med ian St d.Dev. N Mean Median Std.D ev. Wi lcoxon
ƒƒƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒƒ
Pan el A: Firm-s pec ific Vari abl es
U.S. fir ms
MultSh areClass 1330 0. 135 0. 000 0.34 913 0.0 76 0.000 0.26 0.000
St ock_Opt ions 1330 0. 981 1. 000 0.14 913 0.9 54 1.000 0.21 0.000
R_D_to _Sa les 812 -0. 045 -0. 028 0.23 599 0.0 61 -0.025 0.47 0.007
CapEx 1294 -0. 012 -0. 037 0.20 875 0.0 18 -0.043 0.27 0.244
Ma rket _to_Book 1330 -0. 027 -0. 561 2.92 913 0.0 39 -0.905 3.60 0.003
Acqu_A sse ts 1276 0. 003 -0. 017 0.06 875 -0.0 05 -0.017 0.04 0.112
Debt_M atu rity 1209 0. 034 0. 104 0.25 722 -0.0 56 0.057 0.33 0.000
Co vera ge_3y 1330 1. 069 0. 901 5.18 913 -1.5 58 -1.259 6.62 0.000
Levera ge 1305 0. 035 -0. 020 0.22 897 -0.0 52 -0.116 0.20 0.000
Qu ick_ Rat io 1279 -0. 376 -0. 618 1.45 857 0.5 62 -0.203 2.42 0.000
Di vide nd 1330 0. 437 0. 000 0.50 913 0.2 07 0.000 0.41 0.000
ConvDe bt 1261 0. 000 -0. 009 0.04 866 -0.0 00 -0.010 0.04 0.000
Pr efSt ock 1284 0. 000 -0. 006 0.03 879 -0.0 00 -0.006 0.03 0.000
Gr ossP rof itMar gin_ 3y 1330 0. 017 0. 026 0.32 913 -0.0 24 0.055 0.43 0.140
ROA_3y 1330 0. 030 0. 045 0.21 913 -0.0 44 0.033 0.28 0.000
Tangib le_Assets 1088 -0. 012 0. 028 0.15 657 0.0 19 0.061 0.15 0.000
Logsize 1270 0. 383 0. 336 1.56 895 -0.5 43 -0.501 1.55 0.000
Logass ets 1278 0. 448 0. 356 1.46 899 -0.6 37 -0.673 1.39 0.000
D_ Income_Tax_C redit 1330 0. 046 0. 000 0.21 913 0.0 19 0.000 0.14 0.000
In come_Ta x_Cre dit 1190 0. 017 -0. 027 0.57 816 -0.0 25 -0.039 0.24 0.001
Fo reig n_Assets 1018 0. 016 -0. 031 0.15 626 -0.0 26 -0.046 0.11 0.000
Foreig n_Income _3y 595 0. 035 -0. 023 0.28 424 -0.0 50 -0.100 0.20 0.000
Fo reig n_S ales 1112 0. 028 -0. 021 0.20 714 -0.0 43 -0.060 0.21 0.000
FX_Exp osu re 1330 0. 620 1. 000 0.49 913 0.3 99 0.000 0.49 0.000
IR_Exp osure 1305 0. 629 1. 000 0.48 897 0.3 12 0.000 0.46 0.000
CP_Exp osu re 1330 0. 178 0. 000 0.38 913 0.0 62 0.000 0.24 0.000
Exposu re 1330 0. 889 1. 000 0.31 913 0.5 95 1.000 0.49 0.000
LogTob inQ1 1300 -0. 036 -0. 063 0.64 883 0.0 53 0.016 0.76 0.002
LogTob inQ2 1294 -0. 091 -0. 072 0.90 861 0.1 36 0.020 1.23 0.001
NumIndSeg 3940 3. 729 3. 000 1.97 3309 3.2 97 3.000 1.86 0.000
Mu ltIn dSeg 3940 0. 884 1. 000 0.32 3309 0.8 45 1.000 0.36 0.000
Fo reig n_L isting 3969 0. 127 0. 000 0.33 3340 0.0 55 0.000 0.23 0.000
NegBoo kValue 3969 0. 026 0. 000 0.16 3340 0.0 23 0.000 0.15 0.199
Non- U.S. fi rms
MultSh areClass 2639 0. 164 0. 000 0.37 2427 0.0 95 0.000 0.29 0.000
St ock_Opt ions 2639 0. 757 1. 000 0.43 2427 0.7 24 1.000 0.45 0.003
R_D_to _Sa les 1106 -0. 035 -0. 039 0.28 649 0.0 60 -0.038 0.54 0.225
CapEx 2483 -0. 006 -0. 025 0.18 2132 0.0 07 -0.037 0.26 0.000
Market _to _Book 2639 -0. 076 -0. 602 2.61 2427 0.0 82 -0.570 2.98 0.355
Acqu_A sse ts 2161 0. 003 -0. 012 0.06 1768 -0.0 04 -0.012 0.05 0.162
Debt_M atu rity 2424 0. 025 0. 071 0.28 1997 -0.0 31 -0.019 0.33 0.000
Covera ge_ 3y 2639 0. 619 0. 891 5.19 2427 -0.6 73 -0.670 6.06 0.000
(continued)

35
 Table 3: Univariate Tests of Derivatives Use (continued)

_Hedger_ Nonhedge r _Tests

Va riab le N Mean Med ian St d.Dev. N Mean Median Std.D ev. Wi lcoxon
ƒƒƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒƒ

Levera ge 2542 0. 033 0. 004 0.23 2323 -0.0 36 -0.085 0.24 0.000
Qu ick_ Rat io 2482 -0. 236 -0. 372 1.37 2218 0.2 64 -0.292 2.21 0.000
Di vide nd 2639 0. 666 1. 000 0.47 2427 0.4 66 0.000 0.50 0.000
ConvDe bt 2231 0. 002 -0. 005 0.03 1855 -0.0 02 -0.005 0.02 0.000
Pr efSt ock 2499 0. 001 -0. 002 0.02 2272 -0.0 01 -0.001 0.02 0.000
Gr ossP rof itMar gin_ 3y 2639 0. 080 0. 135 0.37 2427 -0.0 86 0.006 0.43 0.000
ROA_3y 2639 0. 039 0. 094 0.28 2427 -0.0 42 0.052 0.33 0.000
Tangib le_Assets 2431 -0. 002 0. 021 0.13 2264 0.0 02 0.023 0.14 0.050
Logsize 2515 0. 531 0. 461 1.65 2319 -0.5 76 -0.598 1.45 0.000
Logass ets 2520 0. 555 0. 449 1.56 2321 -0.6 03 -0.589 1.37 0.000
D_ Income_Tax_C redit 2639 0. 028 0. 000 0.16 2427 0.0 13 0.000 0.11 0.000
In come_Ta x_Cre dit 1622 0. 000 -0. 007 0.38 1339 -0.0 00 -0.005 0.29 0.001
Fo reig n_Assets 1122 0. 025 -0. 015 0.21 800 -0.0 34 -0.091 0.20 0.000
Fo reig n_I ncome _3y 693 0. 026 -0. 031 0.34 395 -0.0 46 -0.093 0.32 0.000
Fo reig n_S ales 1810 0. 024 0. 004 0.27 1312 -0.0 34 -0.088 0.29 0.000
FX_Exp osu re 2639 0. 594 1. 000 0.49 2427 0.4 15 0.000 0.49 0.000
IR_Exp osu re 2542 0. 605 1. 000 0.49 2323 0.3 81 0.000 0.49 0.000
CP_Exp osu re 2639 0. 163 0. 000 0.37 2427 0.0 92 0.000 0.29 0.000
Exposu re 2639 0. 843 1. 000 0.36 2427 0.6 46 1.000 0.48 0.000
LogTob inQ1 2536 -0. 045 -0. 078 0.62 2300 0.0 50 -0.029 0.74 0.000
LogTob inQ2 2509 -0. 058 -0. 090 0.95 2201 0.0 66 -0.033 1.19 0.004
NumInd Seg 2617 4. 074 4. 000 2.04 2399 3.6 02 3.000 1.92 0.000
MultIn dSeg 2617 0. 904 1. 000 0.30 2399 0.8 82 1.000 0.32 0.007
Fo reig n_L isting 2639 0. 192 0. 000 0.39 2427 0.0 76 0.000 0.27 0.000
NegBoo kVa lue 2639 0. 018 0. 000 0.13 2427 0.0 23 0.000 0.15 0.093

Pan el B: Country Vari abl es

Resu lts with U.S. fi rms
Ci vil_Law 3938 0. 289 0. 000 0.45 3267 0.2 71 0.000 0.44 0.047
Sh areh old er_Ri ghts 3938 4. 178 5. 000 1.24 3267 4.0 28 5.000 1.40 0.000
Cr edit or_Rights 3938 1. 924 1. 000 1.26 3264 2.2 51 2.000 1.36 0.000
Ru le_o f_Law 3938 9. 263 10. 000 1.22 3267 9.0 16 10.000 1.33 0.000
Di sclo sure 3282 7. 047 8. 000 1.31 2865 6.5 92 7.000 1.43 0.000
LogGDP 3963 28. 043 27. 978 1.67 3331 27.647 27.889 1.73 0.000
GDP_Ca pita 3963 27. 188 23. 928 8.80 3331 24.411 23.679 9.79 0.000
EXIM_GDP 3963 62. 932 55. 910 67.56 3331 95.038 56.330 95 .51 0.000
FX_Risk 3963 0. 042 0. 049 0.02 3331 0.0 39 0.033 0.02 0.000
IR_Risk 3963 0. 011 0. 009 0.01 3331 0.0 12 0.008 0.01 0.000
Resu lts wit hout U.S. fi rms
Ci vil_ Law 2608 0. 436 0. 000 0.50 2354 0.3 76 0.000 0.48 0.000
Sh areh old er_Ri ghts 2608 3. 759 4. 000 1.35 2354 3.6 51 4.000 1.49 0.080
Cr edit or_Rights 2608 2. 395 2. 000 1.31 2351 2.7 37 3.000 1.32 0.000
Ru le_o f_Law 2608 8. 887 8. 980 1.36 2354 8.6 34 8.570 1.39 0.000
Di sclo sure 1952 6. 398 7. 000 1.35 1952 5.9 33 5.000 1.29 0.000
LogGDP 2633 27. 097 27. 257 1.24 2418 26.7 90 26.690 1.21 0.000
GDP_Ca pita 2633 23. 272 22. 960 8.41 2418 20.4 36 22.800 8.62 0.000
EXIM_GDP 2633 84. 240 64. 070 74.28 2418 123. 09 75.801 98 .47 0.000
FX_Risk 2633 0. 035 0. 019 0.03 2418 0.0 32 0.020 0.02 0.438
IR_Risk 2633 0. 009 0. 008 0.01 2418 0.0 10 0.008 0.01 0.000

36
 Table 4: Determinants of Derivative Use

The table reports regression coefficients and their p-values (in brackets) from LOGIT regressions of the relation between the likelihood of derivatives use, proxies of incentives for hedging, proxies
for foreign exchange rate exposure, and control variables. Below the coefficients, information about the goodness of fit and the number of observations is reported. The specifications cover the
following subsamples: (1) All countries, (2) All countries other than United States, (3) United States, (4) United Kingdom, (5) Japan (6) Germany, (7) Canada, (8) Australia, (9) All other countries.
Panel A refers to general derivatives use, Panel B to FX derivatives use, Panel C to IR derivatives use, and Panel D to CP derivatives use.
Panel A: General Derivatives Use

All Cou ntr ies All ex. U. S. U. S. U.K. Japan Ger ma ny Canada Aust ralia All Other
Va riab le Coef pva lue Coef pval ue Coef pval ue Coef pva lue Coef pva lue Coef pva lue Coef pva lue Coef pva lue Coef pva lue
ƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒ ƒƒ ƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒ ƒƒ ƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒ ƒƒ ƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒ ƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒƒƒ ƒƒ ƒƒ ƒƒ ƒƒ ƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒ ƒƒƒƒ ƒƒ ƒƒ ƒƒ ƒƒƒƒƒƒ ƒƒ ƒƒƒƒ ƒƒ ƒƒƒƒ ƒƒ ƒƒ ƒƒ ƒ
In terc ept -0. 39 [0. 00] -0. 47 [0.0 0] -1 .29 [0.0 0] -16. 52 [0. 98] 1. 27 [0. 04] -1 .84 [0. 00] -0 .74 [0. 34] 0.21 [0. 76] -0 .82 [0. 00]
MultSh areClass 0. 42 [0. 00] 0. 30 [0.0 2] 0.52 [0.0 1] 0. 43 [0. 50] 0.67 [0. 16] 0.89 [0. 03] 0.63 [0. 00]
St ock_ Opt ions 0. 33 [0. 00] 0. 11 [0.2 4] 1.44 [0.0 0] 15. 83 [0. 98] -0 .86 [0. 03] 0.87 [0. 01] 0.10 [0. 88] 0.56 [0. 37] 0.24 [0. 06]
CapEx 0. 18 [0. 36] 0. 36 [0.1 2] 0.12 [0.7 5] -0 .53 [0. 35] 6.07 [0. 03] -0 .77 [0. 32] 2.34 [0. 00] -0 .20 [0. 86] 0.28 [0. 39]
Market _to _Book -0. 04 [0. 00] -0. 05 [0.0 0] 0.02 [0.5 6] -0 .01 [0. 84] -0 .08 [0. 45] -0 .17 [0. 04] -0 .29 [0. 00] -0 .13 [0. 26] -0 .03 [0. 22]
Market _to _B*Le vera ge -0. 03 [0. 63] -0. 05 [0.5 3] 0.20 [0.1 9] 0.63 [0. 01] -0 .79 [0. 05] -0 .72 [0. 02] -0 .27 [0. 51] -0 .04 [0. 93] -0 .09 [0. 36]
Acqu_A sse ts 1. 07 [0. 09] 0. 90 [0.2 4] 1.72 [0.1 6] 1. 95 [0. 18] 29 .77 [0. 18] 1.00 [0. 67] -1 .55 [0. 65] -0 .84 [0. 51]
Debt_M atu rity 0. 34 [0. 00] 0. 11 [0.4 2] 0.65 [0.0 0] 0. 33 [0. 31] 0.55 [0. 46] -0 .12 [0. 80] 0.71 [0. 21] -0 .44 [0. 54] -0 .04 [0. 84]
Covera ge_ 3y -0. 02 [0. 00] -0. 05 [0.0 0] -0 .00 [0.8 1] -0 .09 [0. 00] 0.03 [0. 47] -0 .05 [0. 12] -0 .04 [0. 19] -0 .13 [0. 03] -0 .05 [0. 00]
Levera ge 1. 09 [0. 00] 0. 84 [0.0 0] 2.06 [0.0 0] 1. 26 [0. 08] 1.50 [0. 18] 1.04 [0. 18] 0.78 [0. 43] 0.86 [0. 55] 0.80 [0. 00]
Qu ick_ Rat io -0. 08 [0. 00] -0. 08 [0.0 1] -0 .11 [0.0 1] 0. 02 [0. 81] -0 .27 [0. 28] -0 .23 [0. 02] -0 .33 [0. 00] -0 .09 [0. 60] -0 .03 [0. 61]
Di vide nd 0. 52 [0. 00] 0. 75 [0.0 0] 0.51 [0.0 0] 1.56 [0. 00] -0 .01 [0. 98] 0.54 [0. 15] 0.33 [0. 39] 1.14 [0. 03] 0.56 [0. 00]
ConvDe bt 0. 29 [0. 77] 1. 91 [0.1 7] -2 .93 [0.0 6] 1. 22 [0. 78] 1. 05 [0. 80] -3 .29 [0. 49] 28 .90 [0. 11] 3.53 [0. 06]
Pr efSt ock -0. 51 [0. 73] 2. 12 [0.3 5] -3 .10 [0.1 4] 2. 64 [0. 49] -207.9 [0. 02] 10 .50 [0. 52] 14 .00 [0. 12] -8 .87 [0. 27] -2 .31 [0. 68]
Gr ossP rof itMar gin_ 3y 0. 14 [0. 24] 0. 60 [0.0 0] -0 .50 [0.0 3] 0. 52 [0. 11] -0 .04 [0. 96] -0 .30 [0. 51] 0.33 [0. 54] 1.99 [0. 04] 0.85 [0. 00]
Tangib le_Assets 0. 87 [0. 00] 1. 24 [0.0 0] 0.22 [0.6 2] 2. 15 [0. 00] 5.89 [0. 21] 0.34 [0. 75] 3.69 [0. 00] 4.32 [0. 00] 0.30 [0. 57]
Logsize 0. 41 [0. 00] 0. 43 [0.0 0] 0.31 [0.0 0] 0. 57 [0. 00] 0.12 [0. 54] 0.72 [0. 00] 0.78 [0. 00] 0.68 [0. 00] 0.33 [0. 00]
D_ Income_Tax_C redit 0. 95 [0. 00] 0. 96 [0.0 0] 1.16 [0.0 0] 1. 03 [0. 19] -0 .59 [0. 73] 0.80 [0. 23] 0.48 [0. 37]
In come _Ta x_Cre dit -1 .07 [0. 82]
FX_Exp osu re 0. 36 [0. 00] 0. 20 [0.0 1] 0.84 [0.0 0] 1. 08 [0. 00] 0.48 [0. 18] 0.57 [0. 13] 0.70 [0. 03] 0.09 [0. 84] -0 .06 [0. 59]
Fo reig n_L isting 0. 10 [0. 42] 0. 22 [0.0 7] 0. 26 [0. 56] 0.40 [0. 39] -0 .46 [0. 48] -1 .16 [0. 06] 0.33 [0. 03]
NegBoo kVa lue -0. 02 [0. 93] -0. 16 [0.6 1] 0.43 [0.3 2] -0 .37 [0. 68] -1 .94 [0. 20] -14 .72 [0. 98] -0 .37 [0. 73] 13 .83 [0. 99] 0.01 [0. 97]
D_year -0. 29 [0. 00] -0. 26 [0.0 0] -0 .51 [0.0 0] -0 .55 [0. 00] -1 .24 [0. 00] -0 .37 [0. 21] 0.35 [0. 28] -0 .49 [0. 31] -0 .01 [0. 95]

AIC 5156.7 3541 .3 1524 .9 623 .78 297 .58 360 .45 308 .80 193 .98 186 9.3
SC 5296.9 3673 .1 1634 .6 721 .72 372 .83 436 .91 385 .50 257 .61 198 5.8
-2 Log L 5112.7 3497 .3 1482 .9 579 .78 255 .58 320 .45 266 .80 153 .98 182 5.3
R- Squa re 0.15 0. 16 0. 19 0.32 0.15 0.32 0.32 0.27 0.14

Observ ati ons 4331 2957 1374 634 266 338 285 17 8 147 3
(continued)

37
 Table 4: Determinants of Derivative Use (continued)

Panel B: FX Derivatives Use

All Count ries All ex. U.S. U.S. U.K. Japan Ge rmany Cana da Aus tral ia All Oth er
Varia ble Coef pv alue Coef pva lue Coef pva lue Coef pv alue Coef pv alue Coef pv alue Coef pv alue Coef pv alue Coef pv alue
ƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒ ƒƒ ƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒ ƒƒ ƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒ ƒƒ ƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒ ƒƒ ƒƒ ƒƒ ƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒƒƒ ƒƒ ƒƒ ƒƒ ƒƒ ƒƒƒƒ ƒƒ ƒƒƒƒ ƒƒ ƒƒƒƒ ƒƒ ƒƒ ƒƒ ƒƒƒƒƒƒ ƒƒ ƒƒƒƒ ƒƒ ƒƒƒƒ ƒƒ ƒƒ ƒƒ ƒ
In terc ept -1. 58 [0. 00] -1. 27 [0.0 0] -3 .36 [0.0 0] -16. 20 [0. 97] -0 .36 [0. 50] -2 .06 [0. 00] -2 .73 [0. 00] -1 .08 [0. 08] -1 .67 [0. 00]
MultSh areClass 0. 03 [0. 80] -0. 02 [0.8 9] 0.07 [0.7 1] 0. 58 [0. 31] 0.22 [0. 62] 0.45 [0. 20] 0.34 [0. 02]
St ock_ Opt ions 0. 24 [0. 00] 0. 28 [0.0 0] 0.92 [0.0 6] 14. 79 [0. 98] -0 .33 [0. 38] 0.73 [0. 03] 1.39 [0. 10] 0.86 [0. 10] 0.55 [0. 00]
CapEx -0. 10 [0. 64] 0. 07 [0.7 5] -0 .91 [0.0 9] -0 .13 [0. 81] 5.60 [0. 02] -0 .21 [0. 76] 0.53 [0. 42] 0.28 [0. 79] -0 .16 [0. 64]
Market _to _Book -0. 05 [0. 00] -0. 06 [0.0 0] -0 .03 [0.3 2] -0 .09 [0. 01] -0 .03 [0. 76] -0 .23 [0. 01] -0 .19 [0. 04] -0 .24 [0. 04] -0 .02 [0. 50]
Market _to _B*Le vera ge -0. 08 [0. 24] -0. 06 [0.4 1] -0 .09 [0.5 6] 0. 08 [0. 71] -0 .49 [0. 15] -0 .82 [0. 01] -0 .14 [0. 72] -0 .60 [0. 20] -0 .06 [0. 52]
Acqu_A sse ts 0. 02 [0. 96] -0. 27 [0.7 2] 1.23 [0.3 1] 0. 13 [0. 91] 25 .43 [0. 18] -3 .29 [0. 20] 1.17 [0. 67] -0 .22 [0. 86]
Debt_M atu rity -0. 07 [0. 60] -0. 09 [0.5 5] -0 .15 [0.5 6] -0 .05 [0. 88] 1.37 [0. 04] -0 .28 [0. 55] -0 .13 [0. 81] -1 .11 [0. 10] -0 .16 [0. 45]
Covera ge_3y -0. 04 [0. 00] -0. 05 [0.0 0] -0 .03 [0.0 2] -0 .08 [0. 00] 0.02 [0. 60] -0 .04 [0. 20] -0 .02 [0. 64] -0 .07 [0. 20] -0 .06 [0. 00]
Levera ge 0. 25 [0. 20] 0. 24 [0.2 9] 0.45 [0.3 1] -0 .65 [0. 34] 1.37 [0. 17] 0.09 [0. 90] 0.03 [0. 97] -1 .96 [0. 13] 0.31 [0. 31]
Qu ick_ Rat io -0. 11 [0. 00] -0. 08 [0.0 2] -0 .15 [0.0 0] -0 .02 [0. 83] -0 .28 [0. 26] -0 .21 [0. 04] -0 .11 [0. 27] -0 .26 [0. 11] -0 .06 [0. 31]
Di vide nd 0. 62 [0. 00] 0. 62 [0.0 0] 0.53 [0.0 0] 1. 19 [0. 00] 0.40 [0. 45] 0.70 [0. 08] -0 .09 [0. 79] 0.61 [0. 20] 0.43 [0. 00]
ConvDe bt 1. 38 [0. 15] 1. 17 [0.3 6] 0.74 [0.6 4] -1 .29 [0. 73] 2.29 [0. 54] -1 .66 [0. 68] -9 .56 [0. 31] 2.34 [0. 19]
Pr efSt ock -0. 77 [0. 61] 1. 94 [0.3 6] -3 .63 [0.1 6] 3. 33 [0. 33] -200.3 [0. 01] 22 .88 [0. 22] 6.99 [0. 23] -11 .58 [0. 18] -2 .67 [0. 65]
Gr ossP rof itMar gin_ 3y 0. 22 [0. 08] 0. 42 [0.0 0] -0 .61 [0.0 2] 0. 40 [0. 20] -0 .35 [0. 68] -0 .53 [0. 27] 0.47 [0. 37] 0.37 [0. 68] 0.84 [0. 00]
Tangib le_Assets 1. 07 [0. 00] 1. 13 [0.0 0] 1.07 [0.0 2] 1. 80 [0. 00] 4.60 [0. 27] 0.26 [0. 82] 3.09 [0. 00] 5.30 [0. 00] -0 .10 [0. 86]
Logsize 0. 39 [0. 00] 0. 40 [0.0 0] 0.38 [0.0 0] 0. 50 [0. 00] 0. 09 [0. 62] 0.75 [0. 00] 0.77 [0. 00] 0.62 [0. 00] 0.30 [0. 00]
D_ Income_Tax_C redit 0. 09 [0. 66] 0. 64 [0.0 2] -0 .28 [0.5 0] 1. 18 [0. 08] -0 .44 [0. 79] 0.45 [0. 43] 0.20 [0. 70]
In come _Ta x_Cre dit 0.43 [0. 88]
FX_Exp osu re 0. 83 [0. 00] 0. 35 [0.0 0] 2.29 [0.0 0] 1. 31 [0. 00] 0.80 [0. 01] 0.19 [0. 64] 0.52 [0. 10] -0 .13 [0. 73] 0.02 [0. 89]
Fo reig n_L isting 0. 51 [0. 00] 0. 44 [0.0 0] 0. 44 [0. 24] 0.56 [0. 15] -0 .04 [0. 95] -0 .09 [0. 86] 0.50 [0. 00]
Ne gBoo kValue -0. 20 [0. 40] -0. 15 [0.6 3] -0 .35 [0.3 9] -0 .35 [0. 66] -1 .73 [0. 22] -14 .19 [0. 98] 0.44 [0. 64] -14 .24 [0. 99] -0 .11 [0. 80]
D_year -0. 24 [0. 00] -0. 23 [0.0 0] -0 .33 [0.0 2] -0 .55 [0. 00] -0 .79 [0. 02] -0 .25 [0. 39] 0.03 [0. 93] 0.22 [0. 62] 0.03 [0. 83]

AIC 5120.1 3624 .2 1386 .2 699 .97 349 .32 351 .05 341 .64 230 .60 177 3.4
SC 5260.3 3756 .1 1495 .9 797 .92 424 .57 427 .51 418 .35 294 .23 188 9.9
-2 Log L 5076.1 3580 .2 1344 .2 655 .97 307 .32 311 .05 299 .64 190 .60 172 9.4
R- Squa re 0.16 0. 14 0. 27 0.29 0.18 0.27 0.26 0.26 0.12

Observ ati ons 4331 2957 1374 634 266 338 285 178 147 3
(continued)
In terc ept
-2. 80
[0. 00]
-2. 62
[0.0 0]
-2 .71
[0.0 0]
-5 .83
[0. 00] 38
-3 .08
[0. 00]
-6 .98
[0. 00]
-1 .93
 [0. 00]
-3 .58
[0. 00]
MultSh areClass
-0. 26
[0. 11]
-0. 46
[0.0 4]
Table 4: Determinants
-0 .13of Derivative Use (continued)
[0.6 0]
-0 .03
Panel C:
[0Interest
. 98] Rate Derivatives Use
0.00

All Count ries All ex. U.S. U.S. U.K.

-0 .46 Japan Ge rmany Ca nada Aus tral ia All Oth er
Varia ble Coef pv alue Coef pva lue Coef pva lue [0Coe . 57]
f pv alue Coef pv alue Coef pv alue Coef pv alue Coef pv alue Coef pv alue
-1 ƒƒƒƒ
ƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒ ƒƒ ƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒ ƒƒ ƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒ ƒƒ ƒƒƒ .52 ƒƒƒƒƒƒƒ ƒƒ ƒƒ ƒƒ ƒƒ ƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒƒƒ ƒƒ ƒƒ ƒƒ ƒƒ ƒƒƒƒ ƒƒ ƒƒƒƒ ƒƒ ƒƒƒƒ ƒƒ ƒƒ ƒƒ ƒƒƒƒƒƒ ƒƒ ƒƒƒƒ ƒƒ ƒƒƒƒ ƒƒ ƒƒ ƒƒ ƒ
[0. 00]
In terc ept -1. 31 [0. 00] -1. 70 [0.0 0] -2 .19 [0.0 0] -18. 74 [0. 98] 0. 75 [0. 22] -3 .55 [0. 00] -1 .77 [0. 03] -0 .48 [0. 46] -2 .52 [0. 00]
MultSh areClass 0. 12 [0. 25] -0. 19 [0.1 3] 0.51 [0.0 0] 0. 32 [0. 58] 0.15 [0. 74] -0 .43 [0. 28] 0.32 [0. 05]
St ock_ Opt ions 0. 27 [0. 00] -0. 08 [0.4 5] 1.66 [0.0 0] 16. 28 [0. 98] -0 .19 [0. 60] 0.61 [0. 14] -0 .08 [0. 91] -0 .17 [0. 76] 0.31 [0. 05]
CapEx 0. 15 [0. 44] 0. 24 [0.3 5] 0.52 [0.1 6] -0-0.09.01 [0. 88] 3.30 [0. 20] -1 .39 [0. 37] 0.07 [0. 92] -0 .00 [0. 99] 0.33 [0. 37]
Market _to _Book -0. 04 [0. 00] -0. 07 [0.0 0] 0.03 [0.2 4] [0
-0 ..04
97][0. 32] 0.01 [0. 93] -0 .19 [0. 06] -0 .11 [0. 25] -0 .08 [0. 51] -0 .09 [0. 01]
St ock_ Opt ions
Market _to _B*Le vera ge 0. 01 [0. 89] 0. 03 [0.7 4] 0.04 [0.7 6] 0. 36 [0. 17] -0 .36 [0. 34] -0 .22 [0. 55] -0 .79 [0. 09] 0.55 [0. 34] -0 .08 [0. 54]
0. 26
Acqu_A sse ts 0. 40 [0. 51] 0. 48 [0.5 4] 0.24 [0.8 2] [01..76
08][0. 21] -1 .24 [0. 94] 0.47 [0. 85] -1 .07 [0. 72] -1 .20 [0. 40]
Debt_M atu rity 0. 89 [0. 00] 0. 84 [0.0 0] 0.84 [0.0 0] -0
0..7836 [0. 03] 1.14 [0. 10] 0.99 [0. 11] 2.06 [0. 00] 0.66 [0. 33] 0.87 [0. 00]
Covera ge_3y -0. 02 [0. 04] -0. 06 [0.0 0] 0.02 [0.2 5] [0
-0 .0
.074][0. 01] -0 .02 [0. 63] 0.02 [0. 58] -0 .02 [0. 63] -0 .05 [0. 35] -0 .09 [0. 00]
0.12
Levera ge 1. 59 [0. 00] 1. 64 [0.0 0] 1.65 [0.0 0] [02..7
879][0. 00] 3.01 [0. 00] 1.82 [0. 06] 2.48 [0. 02] 2.72 [0. 05] 0.87 [0. 01]
Qu ick_ Rat io -0. 07 [0. 01] -0. 05 [0.2 2] -0 .15 [0.0 0] 0. 04 [0. 66] 0. 03 [0. 91] -0 .49 [0. 01] -0 .28 [0. 07] 0.04 [0. 80] -0 .03 [0. 58]
Di vide nd 0. 61 [0. 00] 1. 15 [0.0 0] 0.52 [0.0 0] 2. 33 [0. 00] 0.21 [0. 72] 0.84 [0. 07] 1.24 [0. 00] 1.54 [0. 00] 0.71 [0. 00]
ConvDe bt -1. 89 [0. 05] -0. 87 [0.5 2] -3 .59 [0.0 1] 2. 96 [0. 47] -5 .01 [0. 19] -5 .18 [0. 28] 12 .60 [0. 30] -1 .20 [0. 55]
Pr efSt ock 0. 54 [0. 71] 1. 58 [0.4 7] -0 .39 [0.8 4] 4.0.43
87 [0. 17] -118.9 [0. 15] 10 .56 [0. 39] -1 .57 [0. 79] -2 .04 [0. 80] -15 .56 [0. 14]
[0. 49]
Gr ossP rof itMar gin_ 3y -0. 33 [0. 00] 0. 26 [0.1 4] -0 .74 [0.0 0] -0 .28 [0. 46] 0.12 [0. 89] 0.74 [0. 27] -0 .74 [0. 23] -0 .05 [0. 95] 1.15 [0. 00]
-0 .19
Tangib le_Assets -0. 32 [0. 22] 0. 16 [0.6 5] -1 .20 [0.0 0] [01..58
80][0. 02] 1. 96 [0. 66] -0 .32 [0. 82] -0 .89 [0. 47] 1.67 [0. 20] -0 .74 [0. 22]
Logsize 0. 42 [0. 00] 0. 48 [0.0 0] 0.26 [0.0 0] -1 .56 [0. 00]
0. 80 0.23 [0. 21] 0.61 [0. 00] 0.57 [0. 00] 0.48 [0. 00] 0.37 [0. 00]
D_ Income_Tax_C redit 0. 36 [0. 09] 0. 52 [0.0 8] 0.22 [0.4 9] [00..30
05] [0. 61] 0.29 [0. 89] 1.27 [0. 06] 0.48 [0. 40]
0.30
In come _Ta x_Cre dit -9 .46 [0. 14]
[0. 69]
FX_Exp osu re 0. 08 [0. 24] 0. 12 [0.2 0] 0.06 [0.6 2] 00
-. 10.31 [0. 68] 0.22 [0. 53] 0.52 [0. 31] -0 .09 [0. 80] 0.38 [0. 34] 0.17 [0. 22]
Fo reig n_L isting 0. 16 [0. 15] 0. 33 [0.0 0] [00..74
29][0. 06] 0. 12 [0. 77] 0.38 [0. 58] -1 .01 [0. 07] 0.47 [0. 00]
NegBoo kVa lue 0. 05 [0. 82] 0. 01 [0.9 6] 0.36 [0.3 4] CapEx -0 .13 [0. 87] -0 .99 [0. 50] -13 .30 [0. 98] 0.69 [0. 49] 13 .82 [0. 99] -0 .25 [0. 63]
0. 18
D_year -0. 14 [0. 05] -0. 21 [0.0 2] -0 .15 [0.2 4] -0 ..28
[0 54][0. 21] -1 .81 [0. 00] -0 .05 [0. 89] 0.01 [0. 97] -0 .16 [0. 71] 0.16 [0. 26]
0. 84
AIC 5010.7 3149 .9 1684 .3 [0.0 2]577 .34 331 .44 257 .60 287 .52 220 .67 142 9.9
SC 5150.9 3281 .7 1794 .0 -0 .57675 .29 406 .70 334 .06 364 .22 284 .31 154 6.4
[0.3 1]
-2 Log L 4966.7 3105 .9 1642 .3 -0 .65 533 .34 289 .44 217 .60 245 .52 180 .67 138 5.9
R- Squa re 0.16 0. 21 0. 17 [0. 67] 0.40 0.22 0.35 0.34 0.30 0.16
1.45
Observ ati ons 4331 2957 1374 [0. 66] 634 266 338 285 178 147 3
-14 .24
[0. 01] (continued)
2.34
[0. 00]
6.48
[0. 00]
-0 .39
[0. 63]
Market _to _Book
-0. 02
[0. 34] 39
-0. 08
[0.0 4]
0.04
[0.2 7]
-0 .04
[0. 64]
-0 .06
 -0 .43
[0. 12]
-0 .23
[0. 07]
-0 .01
[0. 96]
-0 .06
[0. 43]
Market _to _B*Le vera ge
Table 4: Incentives for Hedging and Foreign Exchange Rate Exposure (continued)
0. 01
[0. 92]
0. 04
Panel D: [0 Commodity
.8 0] Price Derivatives Use
0.08
All Count ries All ex. U.S. U.S. [0.6U.K.
3] Japan Ge rmany Ca nada Aus tral ia All Oth er
-0 .19
Varia ble Coef pv alue Coef pva lue Coef pva lue Coef pv alue Coef pv alue Coef pv alue Coef pv alue Coef pv alue Coef pv alue
[0. 76]
ƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒ ƒƒ ƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒ ƒƒ ƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒ ƒƒ ƒƒƒ0.49
ƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒ ƒƒ ƒƒ ƒƒ ƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒƒƒ ƒƒ ƒƒ ƒƒ ƒƒ ƒƒƒƒ ƒƒ ƒƒƒƒ ƒƒ ƒƒƒƒ ƒƒ ƒƒ ƒƒ ƒƒƒƒƒƒ ƒƒ ƒƒƒƒ ƒƒ ƒƒƒƒ ƒƒ ƒƒ ƒƒ ƒ
[0. 47]
-0 .44
[0. 68]
0.44
[0. 48]
0.33
[0. 69]
-0 .10
[0. 68]
Acqu_A sse ts
1. 74
[0. 04]
1. 19
[0.3 6]
3.02
[0.0 2]
2. 55
[0. 46]
-8 .53
[0. 72]

3.15
[0. 26]
13 .58
[0. 00]
-0 .19
[0. 94]
Debt_M atu rity
0. 10
[0. 62]
0. 29
[0.3 2]
-0 .26
In[0te.4 rc2]ept
161 . .47
89
[0[0
. 00. 06]
]
0. 17
[0.20
0 . 89]
[0.82.13 2]
1[0
2 ..3111]
2.28
[0.0 0]
[0. 01]
8-.156 .95
[0 . .00
[0 ]
09]
15 -0. 97.10
[0. 83]
[0.0 0]
Cove ra ge_ 3y
-0. 04 40
0.35
[0[0
.7. 0]00]
1-0
1.. 48 04
[0.0 6]
[0.-0 00 ]
.08
8..0
[0 710]
-0 .00
 0-.032.03
[0[0
. 01. 69]
]
-0 .19
0. 43
[0. 10]
[0.0
-0 .060]
0.38
[0 . 28]
[0.00.04 0]
[0
0.. 2765]
[0.-0 01 ]
.08
0..11
[0 02]
[0.5ve5]
Le ra ge
Table 5: Examination 0.31
[0
1. 29of Country-Specific Determinants
[0 .0. 00]
8]
00. .23
57
The table reports regression coefficients and their p-values (in brackets) [0
from
[0
. 19.1OLS
] regressions of the relation between frequency of derivatives use, country-level averages
8]
0.2.11
12 Below the coefficients, information about the goodness of fit and the number of observa-
for variables describing incentives for hedging, and other country-specific factors.
[0[0
.3.09] 0]
tions is reported. -3. 40
St ock_ Opt ions
[0. 09]
0. 44
1.28
[0 . 00
[0 ]
. 41]
0-.130.00
(01) (0 2) (03) [0.0 2] (04) (0 5) (06) (07) (0 8)
[0. 67]
Va riab le Coef pva lue Coef pval ue Coef pval0.45 ue
-0 .54 Coef pva lue Coef pval ue Coef pval ue Coef pva lue Coef pval ue
ƒƒƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ [0 .0
[0 . 0]
68]
ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒ
0.4.24
47
Inter cept 1. 96 [0. 02] 2. 08 [0.0 0] 1.71 [0.0[0 .4] ] 1. 86 [0. 05] 1. 46 [0.0 5] 0.15 [0.6 4] 1. 13 [0. 16] 1. 42 [0.0 5]
[0 .0006]
Lever age 0. 88 [0. 05] 0. 76 [0.0 4] 0.59 [0.106] 28 0. 41 [0. 42]
.0.27 0. 46 [0.1 9] 0.51 [0.1 7] 0. 22 [0. 57] 0. 48 [0.1 5]
Quick _Ra tio -0. 00 [0. 97] -0. 05 [0.5 7] [0[0
-0 .01 [0.9 .00] . 5]
70]-0. 02 [0. 86] 0. 02 [0.7 8] 0.02 [0.8 5] 0. 07 [0.45] 0. 01 [0.8 6]
Qu ick_ Rat io
Divid end 0. 19 [0. 52] 0. 08 [0.7 2] 0.01 [0.90.14 6] -0. 00 [0. 99] 0. 20 [0.3 6] 0.24 [0.3 1] 0. 07 [0.76] 0. 24 [0.2 5]
[0-0
.2. 9]03
Logsi ze 0. 04 [0. 41] 0. 05 [0.2 8] 0.01 [0.7 [0 6].
0. 30 53] 0. 02 [0. 75] 0. 02 [0.6 9] 0.00 [0.9 8] 0. 05 [0. 28] 0. 01 [0.7 9]
Civil _Law -0. 24 [0. 01] -0. 22 [0.0 0] [0-0
. 03. 10
]
[0 ..1 6]
Share hol der_R ights -0. 01 [0. 79] 0.04 [0.007] 39
0.05
Credi tor _Righ ts -0. 02 [0. 59] [0.0 0]
[0.4 7] 0. 01 [0. 88]
CapEx 0. 20 -0. 05 [0. 10]
LogGDP -0. 07 [0. 02] -0. 07 [0.0 1] -0 .05 [0.007] ..11 -0. 05 [0.0 5] -0. 04 [0. 20] -0. 05 [0.0 5]
[0 32]
GDP_C api ta 0. 01 [0. 00] 0. 01 [0.0 0] 0.01 [0.0[0.8] 62 ]
0.27 0. 01 [0. 11] 0. 01 [0.0 0] 0.01 [0.0 1] 0. 01 [0.0 0]
EXIM_GDP -0. 00 [0. 00] -0. 00 [0.0 0] -0 .00 [0.0 00]
[0 ..0755]-0. 00 [0. 01] -0. 00 [0.0 1] -0 .00 [0.0 8] -0. 00 [0. 08] -0. 00 [0.0 1]
FX_Ri sk -0. 67 [0. 44] -0. 75 [0.3 5] [0.74]
-0 .73 [0.4 4] -0. 21 [0. 82]
0.01 0. 39 [0.6 8] 0.40 [0.6 8] -0. 45 [0. 65]
0.10
[0 . 94]
IR_Ri sk -2. 25 [0. 31] -2. 19 [0.3 1] -3 .33 [0.1
[0-.67]
0 .844] -3. 84 [0. 14] -2. 40 [0.3 3] -2 .11 [0.4 1] -4. 83 [0. 07]
0..26
[0 00]
AdjRSq 0. 40 0. 44 0.26 [0. 0.32
20] 0. 16 0. 27 0.19 0. 08 0. 29
[0. 10 20]
- 0
[0.7 2] .04
Obser vat ions 35 35 35 [0
0.08. 79] 35 40 40 40 40
Di.7
[0 vid e nd
7]
00. .09
57
[0. 00]
[0 . 74]
0. 07
0. 33
[0.7 0]
[0.11.43 8]
Mark
[0.0 et 0]
_to _Book
-0.0.03 63
[0 . 05
[0 ]
. 42]
-0-.003 .15
[0[0
.0. 4] 83]
-0 3.17
.03
[0 .0. 05]
[0 4]
-0.0.7804
[0. 00]
-0. 04
[0.0 2]
-0 .04
[0.0 2]
-0. 04
[0. 02]
-0. 06
[0.0 0]
41
Market _to _B*Le vera ge
0. 06
 [0.3 8]
0.05
[0.4 9]
0. 02
[0. 81]
Table 6: Examination of Country-Specific 0. 07 Determinants in Firm Level Analysis
[0.4 2]
0.07
The table reports regression coefficients and their p-values (in brackets) from LOGIT regressions of the relation between the likelihood of derivatives use, proxies of incentives
[0.4 0]
for hedging, proxies for exposure, proxies for shareholder rights, creditor rights,
0. 05development, disclosure quality, and control variables. Below the coefficients, information
about the goodness of fit and the number of observations is reported. [0. 52]
0. 00
With U.S. fi rms [0.9 8] Wi thout U.S. firms
(01) (0 2) (03) Acqu_A sse ts(04) (0 1) (02) (03) (0 4)
Va riab le Coef pva lue Coef pval ue Coef pval0ue . 90 Coef pva lue Coef pval ue Coef pval ue Coef pva lue Coef pval ue
[0. 21]
ƒƒƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ0.ƒƒƒƒƒƒƒƒ
89 ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒ
[0.2 2]
0.88
[0.2 2]
0. 95
[0. 15]
0. 57
[0.5 3]
0.58
[0.5 2]
0. 57
[0.53]
0. 76
[0.3 5]
Debt_M atu rity
0. 27
[0. 04]
0. 27
[0.0 4]
0.27
[0.0 4]
0. 30
[0. 01]
0. 01
[0.9 2]
0.02
[0.9 2]
0. 02
[0. 92]
0. 10
[0.4 9]
Covera ge_ 3y
-0. 03
[0. 00]
-0. 03
[0.0 0]
-0 .03
[0.0 0]
-0. 03
[0. 00]
-0. 05
[0.0 0]
-0 .06
[0.0 0]
-0. 05
[0. 00]
-0. 05
[0.0 0]
Levera ge
1. 26
[0. 00]
1. 24
[0.0 0]
 1. 23
[0. 00]
0. 87
[0.0 0]
0.86
[0.0 0]
0. 88
Table 7: Univariate Analysis[0 with
. 00]Tobin’s Q
0. 93
[0.0 0]
The table reports results of univariate tests with Tobin’s Q. In particular, it shows
Qu ick_theRa mean,
t io median and standard deviation of Tobin’s Q
for hedgers and non-hedgers. Moreover, the difference in the means and medians -0. 07as well p-values of mean tests, median tests as well as
Wilcoxon rank sum tests are shown. N is the number of observations (firms). [0 . 01]
Tests
-0. 07are conducted separately for U.S. firms as well as Non-
U.S. firms, and for firms with and without different types of exposure. Panel A refers
[0.0 1]to general derivatives’ use, while Panel B documents
results for FX derivatives’ use. Results for IR and CP derivatives are reported in-0Panels
.07 C and D, respectively.
[0.0 1]
-0. 09
[0. 00]
U.S. fir ms -0. 05 Non-U .S. firms
Hedger Nonhedg er Dif f. [0.2 pv3]al Hed ger No nhedger Di ff. pv al
-0 .04
ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒ
[0.2 8]
Panel A: Re sults for General Der iva tives Use -0. 04
Exposu re = 1 Mean -0.19 -0. 12 -0. 07 [0. 27 ]
0. 42 -0 .22 -0.04 -0 .18 0. 00
Medi an -0.41 -0. 54 0. 13-0. 0 08
. 01 -0 .33 -0.29 -0 .04 0. 09
[0.0 1]
Stdev 1.35 1. 82 1.07 1.46
Di vide nd
N 1177.00 539. 00 0. 68 2195 .00 1551.00
Wilc oxon [0. 00 ]
0. 01 0. 04
Exposu re = 0 Mean 0.66 0. 59 0. 07 0. 0 68
. 73 0.55 0.46 0.08 0. 53
[0.0 0]
Medi an 0.34 0. 01 0. 33 0.67 0. 01 0.06 -0.14 0.20 0. 03
Stdev 1.78 2. 22 [0.0 0] 1.93 2.12
N 125.00 347. 00 0. 70 342 .00 758.00
Wilc oxon [0. 00 ]
0. 04 0. 04
0. 77
[0.0 0]
FX_Exp osu re = 1 Mean -0.09 0. 06 -0. 14 0.77 0. 22 -0 .15 0.10 -0 .25 0. 00
Medi an -0.38 -0. 48 0. 11[0.000]. 18 -0 .31 -0.26 -0 .05 0. 04
Stdev 1.52 1. 98 0. 74 1.19 1.59
[0.00]
N 824.00 361. 00 0. 77 1560 .00 1004.00
Wilc oxon [0.0 00]
. 16 0. 01
FX_Exp osu re = 0 Mean -0.15 0. 23 -0. 38ConvDe bt
0. 00 -0 .06 0.14 -0 .20 0. 00
-0. 09
Medi an -0.37 -0. 35 -0. 02 0. 41 -0 .29 -0.24 -0 .04 0. 09
[0. 93]
Stdev 1.22 2. 04 -0. 06 1.33 1.81
N 478.00 525. 00 [0.9 6] 977 .00 1305.00
Wilc oxon -0 .17
0. 31 0. 10
[0.8 8]
-0. 06
IR_Exp osure = 1 Mean -0.54 -0. 69 0. 15[0. 950. 04
] -0 .45 -0.45 -0 .00 0. 92
Medi an -0.51 -0. 72 0. 21 2. 0 57
. 00 -0 .41 -0.41 0.00 0. 45
Stdev 0.68 1. 15 [0.1 4] 0.56 0.83
2.59
N 821.00 280. 00 [0.1 4] 1537 .00 881.00
Wilc oxon 2. 0. 00
37 0. 17
IR_Exp osure = 0 Mean 0.63 0. 55 0. 08[0.17 ]
0. 54 0.40 0.48 -0 .07 0. 33
Medi an 0.20 -0. 07 0. 27 1. 0 79
. 00 0.03 -0.05 0.08 0. 04
[0.2 2]
Stdev 1.94 2. 19 Pr efSt ock 1.74 2.01
N 481.00 606. 00 -1. 23 1000 .00 1428.00
Wilc oxon [0. 45 ]
0. 01 0. 14
-1. 36
[0.4 0]
CP_Exp osu re = 1 Mean -0.18 0. 03 -0. 21-1 .27 0. 08 -0 .05 0.29 -0 .34 0. 00
Medi an -0.23 -0. 11 -0. 12 [0.403]. 07 -0 .09 0.01 -0 .10 0. 01
Stdev 0.54 0. 85 -0. 81 0.56 1.38
[0. 60]
N 232.00 56. 00 1. 06 410 .00 211.00
Wilc oxon [0.6 09]
. 02 0. 01
CP_Exp osu re = 0 Mean -0.09 0. 17 -0. 26 0.74 0. 00 -0 .13 0.11 -0 .23 0. 00
Medi an -0.44 -0. 46 0. 01[0.708]. 43 -0 .36 -0.28 -0 .08 0. 00
0. 88
Stdev 1.54 2. 07 [0.74] 1.34 1.75
N 1070.00 830. 00 1. 44 2127 .00 2098.00
Wilc oxon [0.5 05]
. 40 0. 00
(continued)

43
 Table 7: Univariate Analysis with Tobin’s Q (continued)

U.S. fir ms Non-U .S. firms

Hedger Nonhedg er Dif f. pv al Hed ger No nhedger Di ff. pv al
ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒ
Panel B: Re sults for FX Deri vati ves Use
FX_Exp osu re = 1 Mean -0.02 -0. 06 0. 04 0. 68 -0 .13 0.02 -0 .14 0. 01
Medi an -0.34 -0. 45 0. 11 0. 04 -0 .29 -0.29 0.00 0. 44
Stdev 1.59 1. 75 1.21 1.50
N 587.00 598. 00 1210 .00 1354.00
Wilc oxon 0. 05 0. 31
FX_Exp osu re = 0 Mean -0.02 0. 06 -0. 08 0. 57 -0 .06 0.11 -0 .17 0. 01
Medi an -0.23 -0. 38 0. 14 0. 03 -0 .28 -0.25 -0 .03 0. 23
Stdev 1.26 1. 75 1.29 1.74
N 94.00 909. 00 656 .00 1626.00
Wilc oxon 0. 13 0. 26

Fo reign Sales > 0 Mean -0.03 -0. 07 0. 04 0. 68 -0 .13 0.00 -0 .13 0. 02

Medi an -0.34 -0. 45 0. 11 0. 08 -0 .29 -0.29 0.00 0. 39
Stdev 1.59 1. 76 1.21 1.49
N 577.00 582. 00 1197 .00 1319.00
Wilc oxon 0. 05 0. 36
Fo reign Sales = 0 Mean 0.01 0. 06 -0. 05 0. 71 -0 .06 0.12 -0 .18 0. 01
Medi an -0.21 -0. 38 0. 17 0. 01 -0 .28 -0.25 -0 .03 0. 22
Stdev 1.27 1. 74 1.28 1.74
N 104.00 925. 00 669 .00 1661.00
Wilc oxon 0. 08 0. 25

Fo reign Assets > 0 Mean -0.03 -0. 15 0. 13 0. 22 -0 .18 -0.09 -0 .08 0. 21

Medi an -0.34 -0. 46 0. 12 0. 06 -0 .29 -0.28 -0 .01 0. 33
Stdev 1.59 1. 58 1.05 1.25
N 516.00 444. 00 688 .00 588.00
Wilc oxon 0. 04 0. 35
Fo reign Assets = 0 Mean -0.02 0. 08 -0. 09 0. 44 -0 .06 0.10 -0 .17 0. 00
Medi an -0.26 -0. 38 0. 12 0. 04 -0 .28 -0.27 -0 .01 0. 31
Stdev 1.39 1. 81 1.33 1.71
N 165.00 1063. 00 1178 .00 2392.00
Wilc oxon 0. 14 0. 24

Fo reign Income = 0 Mean -0.08 0. 05 -0. 13 0. 15 -0 .08 0.10 -0 .18 0. 00

Medi an -0.33 -0. 40 0. 06 0. 06 -0 .28 -0.26 -0 .02 0. 25
Stdev 1.34 1. 81 1.27 1.68
N 314.00 1223. 00 1284 .00 2452.00
Wilc oxon 0. 22 0. 16
Fo reign Income <> 0 Mean 0.03 -0. 16 0. 18 0. 14 -0 .15 -0.09 -0 .06 0. 41
Medi an -0.33 -0. 41 0. 08 0. 18 -0 .31 -0.34 0.03 0. 27
Stdev 1.70 1. 44 1.17 1.38
N 367.00 284. 00 582 .00 528.00
Wilc oxon 0. 10 0. 33
(continued)

44
 Table 7: Univariate Analysis with Tobin’s Q (continued)

U.S. fir ms Non-U .S. firms

Hedger Nonhedg er Dif f. pv al Hed ger Nonhe dger Di ff. pv al
ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒ
Panel C: Re sults for IR Deri vati ves Use
IR_Exp osure = 1 Mean -0.53 -0. 65 0. 11 0. 03 -0 .43 -0.46 0.02 0. 36
Medi an -0.51 -0. 66 0. 15 0. 00 -0 .40 -0.42 0.03 0. 16
Stdev 0.69 0. 99 0.56 0.74
N 636.00 465. 00 994 .00 1424.00
Wilc oxon 0. 00 0. 05
IR_Exp osure = 0 Mean 0.63 0. 58 0. 05 0. 71 0.35 0.47 -0 .12 0. 19
Medi an 0.35 -0. 03 0. 38 0. 00 0.08 -0.04 0.12 0. 00
Stdev 1.76 2. 17 1.61 1.96
N 236.00 851. 00 404 .00 2024.00
Wilc oxon 0. 01 0. 10

Panel D: Re sults for CP Deri vati ves Use

CP_Exp osu re = 1 Mean -0.21 -0. 06 -0. 16 0. 04 -0 .05 0.10 -0 .15 0. 04
Medi an -0.23 -0. 12 -0. 11 0. 12 -0 .11 -0.05 -0 .06 0. 16
Stdev 0.50 0. 72 0.64 1.02
N 158.00 130. 00 153 .00 468.00
Wilc oxon 0. 02 0. 06
CP_Exp osu re = 0 Mean -0.12 0. 04 -0. 16 0. 18 -0 .19 -0.00 -0 .19 0. 06
Medi an -0.46 -0. 44 -0. 02 0. 29 -0 .37 -0.33 -0 .04 0. 34
Stdev 1.43 1. 83 1.21 1.57
N 175.00 1725. 00 159 .00 4066.00
Wilc oxon 0. 49 0. 17

45
 Table 8: Multivariate Analysis with Tobin’s Q
The table reports the coefficients and p-values of multivariate tests with Tobin’s Q. OLS regressions are estimated separately for firms with
and without a particular exposure as well as for the whole sample, U.S. firms and Non-U.S. firms. Panel A refers to general derivatives’ use
(Hedger), while Panel B documents results for FX derivatives’ use (FX_Derivatives). Results for IR derivatives (IR_Derivatives) are re-
ported in Panel C, and results for CP derivatives (CP_Derivatives) are reported in Panel D.
Panel A: General Derivatives Use
Exp osu re = 0 Exp osure = 1
(01) (0 2) (03) (01) (0 2) (03)
Va riab le Coef pva lue Coef pval ue Coef pval ue Coef pva lue Coef pval ue Coef pval ue
ƒƒƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒ
samp le=A ll count ries
Inter cept -0. 11 [0. 51] -0. 03 [0.8 2] -0 .06 [0.7 9] -0. 04 [0. 50] -0. 01 [0.8 0] 0.05 [0.5 5]
Hedger 0. 29 [0. 01] 0. 29 [0.0 1] 0.30 [0.0 9] -0. 03 [0. 50] -0. 03 [0.5 2] -0 .03 [0.6 8]
R_D_t o_Sales 0.52 [0.0 0] 0.40 [0.0 0]
CapEx 0. 31 [0. 11] 0. 30 [0.1 2] -0 .41 [0.2 0] 0. 38 [0. 00] 0. 38 [0.0 0] 0.21 [0.2 9]
Lever age -2. 48 [0. 00] -2. 58 [0.0 0] -3 .14 [0.0 0] -2. 44 [0. 00] -2. 44 [0.0 0] -2 .97 [0.0 0]
Divid end -0. 23 [0. 05] -0. 19 [0.1 1] -0 .43 [0.0 3] -0. 08 [0. 05] -0. 08 [0.0 6] -0 .12 [0.1 1]
ROA_3y -0. 09 [0. 63] -0. 08 [0.6 3] 0.12 [0.6 8] 0. 09 [0. 32] 0. 09 [0.3 2] 0.35 [0.0 2]
Logas sets -0. 10 [0. 01] -0. 09 [0.0 3] -0 .00 [0.9 7] -0. 02 [0. 11] -0. 02 [0.1 1] -0 .00 [0.9 8]
Forei gn_Sales 0. 35 [0. 00] 0. 35 [0.0 0] 0.39 [0.0 0]
NumIn dSeg -0. 05 [0.1 1] -0 .03 [0.5 3] 0. 00 [0.7 0] -0 .01 [0.5 5]
MultI ndS eg -0. 08 [0. 55] 0. 05 [0. 39]
NegBo okValue 0. 01 [0. 98] 0. 02 [0.9 6] 0.52 [0.5 0] 0. 98 [0. 00] 0. 98 [0.0 0] 1.18 [0.0 0]
D_year 0. 30 [0. 00] 0. 29 [0.0 0] 0.23 [0.1 6] -0. 04 [0. 37] -0. 04 [0.3 7] 0.05 [0.4 4]
Obser vat ions 1423 .0 1423 .0 582 .00 4224 .0 4224 .0 2168.0
AdjRSq 0. 03 0. 03 0.05 0. 16 0. 16 0.17
samp le=Non-U.S. firms
Inter cept -0. 43 [0. 04] -0. 25 [0.1 7] 0.04 [0.9 0] -0. 09 [0. 28] 0. 01 [0.8 3] 0.10 [0.4 1]
Hedger 0. 37 [0. 00] 0. 36 [0.0 0] 0.29 [0.2 1] -0. 01 [0. 87] -0. 01 [0.8 5] -0 .02 [0.8 3]
R_D_t o_Sales 0.37 [0.0 5] 0.23 [0.1 5]
CapEx 0. 28 [0. 25] 0. 27 [0.2 5] -0 .14 [0.7 4] 0. 49 [0. 00] 0. 48 [0.0 0] 0.42 [0.0 8]
Lever age -2. 36 [0. 00] -2. 42 [0.0 0] -2 .62 [0.0 1] -2. 19 [0. 00] -2. 19 [0.0 0] -2 .72 [0.0 0]
Divid end -0. 13 [0. 33] -0. 10 [0.4 6] -0 .48 [0.0 7] -0. 09 [0. 07] -0. 08 [0.1 1] -0 .11 [0.2 9]
ROA_3y -0. 02 [0. 92] -0. 02 [0.9 3] 0.18 [0.6 3] 0. 01 [0. 90] 0. 01 [0.9 2] 0.13 [0.4 7]
Logas sets -0. 16 [0. 00] -0. 14 [0.0 0] -0 .16 [0.1 0] -0. 06 [0. 00] -0. 06 [0.0 0] -0 .07 [0.0 2]
Forei gn_Sales 0. 38 [0. 00] 0. 37 [0.0 0] 0.44 [0.0 0]
NumIn dSeg -0. 03 [0.4 6] -0 .03 [0.7 1] -0. 00 [0.7 0] -0 .02 [0.3 2]
MultI ndS eg 0. 11 [0. 54] 0. 10 [0. 20]
NegBo okValue -0. 21 [0. 84] -0. 21 [0.8 4] 0.00 1. 11 [0. 00] 1. 12 [0.0 0] 1.25 [0.0 0]
D_year 0. 30 [0. 01] 0. 29 [0.0 1] 0.20 [0.4 2] 0. 05 [0. 28] 0. 05 [0.3 2] 0.26 [0.0 0]
Obser vat ions 969. 00 969. 00 283 .00 2752 .0 2752 .0 1180.0
AdjRSq 0. 04 0. 04 0.05 0. 17 0. 17 0.18
samp le=U .S. firms
Inter cept 0. 14 [0. 64] 0. 17 [0.5 6] -0 .06 [0.8 6] 0. 02 [0. 85] -0. 04 [0.6 6] 0.04 [0.7 8]
Hedger 0. 13 [0. 57] 0. 13 [0.5 8] 0.20 [0.4 7] -0. 05 [0. 59] -0. 05 [0.5 5] -0 .08 [0.4 5]
R_D_t o_Sales 0.73 [0.0 0] 0.90 [0.0 0]
CapEx 0. 20 [0. 57] 0. 19 [0.5 9] -0 .81 [0.1 0] 0. 23 [0. 24] 0. 24 [0.2 2] -0 .20 [0.5 6]
Lever age -3. 27 [0. 01] -3. 45 [0.0 1] -3 .89 [0.0 1] -2. 82 [0. 00] -2. 82 [0.0 0] -3 .04 [0.0 0]
Divid end -0. 37 [0. 21] -0. 33 [0.2 7] -0 .56 [0.1 0] -0. 07 [0. 39] -0. 08 [0.3 0] -0 .18 [0.1 1]
ROA_3y -0. 44 [0. 30] -0. 43 [0.3 0] 0.29 [0.5 7] 0. 40 [0. 05] 0. 41 [0.0 5] 0.97 [0.0 0]
Logas sets -0. 01 [0. 89] 0. 00 [0.9 9] 0.14 [0.1 4] 0. 03 [0. 22] 0. 03 [0.2 7] 0.09 [0.0 1]
Forei gn_Sales 0. 27 [0. 14] 0. 28 [0.1 3] 0.25 [0.3 2]
NumIn dSeg -0. 09 [0.2 5] -0 .05 [0.5 3] 0. 01 [0.5 5] 0.01 [0.8 5]
MultI ndS eg -0. 21 [0. 34] -0. 04 [0. 69]
NegBo okValue -0. 00 [0. 99] 0. 01 [0.9 9] 0.71 [0.3 9] 0. 91 [0. 00] 0. 90 [0.0 0] 1.22 [0.0 0]
D_year 0. 24 [0. 23] 0. 23 [0.2 5] 0.31 [0.1 8] -0. 12 [0. 11] -0. 12 [0.1 1] -0 .10 [0.3 1]
Obser vat ions 454. 00 454. 00 299 .00 1472 .0 1472 .0 988 .00
AdjRSq 0. 01 0. 01 0.04 0. 17 0. 17 0.18
(continued)

46
 Table 8: Multivariate Analysis with Tobin’s Q (continued)

Panel B: FX Derivatives Use

FX_E xposure = 0 FX_ Exposure =1
(01) (0 2) (03) (01) (0 2) (03)
Va riab le Coef pva lue Coef pval ue Coef pval ue Coef pva lue Coef pval ue Coef pval ue
ƒƒƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒ
samp le=A ll count ries
Inter cept -0. 02 [0. 75] -0. 05 [0.4 1] -0 .04 [0.7 2] -0. 08 [0. 28] -0. 03 [0.6 5] 0.04 [0.6 2]
FX_De riv atives 0. 09 [0. 13] 0. 09 [0.1 4] 0.16 [0.1 7] 0. 03 [0. 46] 0. 04 [0.4 6] 0.00 [0.9 6]
R_D_t o_Sales 0.53 [0.0 0] 0.35 [0.0 2]
CapEx 0. 18 [0. 07] 0. 18 [0.0 7] -0 .35 [0.0 9] 0. 51 [0. 00] 0. 51 [0.0 0] 0.37 [0.1 1]
Lever age -2. 15 [0. 00] -2. 15 [0.0 0] -2 .40 [0.0 0] -2. 54 [0. 00] -2. 54 [0.0 0] -3 .06 [0.0 0]
Divid end -0. 16 [0. 00] -0. 16 [0.0 0] -0 .27 [0.0 1] -0. 09 [0. 06] -0. 09 [0.0 8] -0 .11 [0.1 5]
ROA_3y -0. 24 [0. 01] -0. 24 [0.0 1] -0 .03 [0.8 7] 0. 16 [0. 11] 0. 15 [0.1 2] 0.42 [0.0 1]
Logas sets -0. 05 [0. 01] -0. 05 [0.0 1] 0.00 [0.9 6] -0. 03 [0. 08] -0. 03 [0.1 0] -0 .00 [0.9 7]
Forei gn_Sales 0. 35 [0. 00] 0. 34 [0.0 0] 0.38 [0.0 1]
NumIn dSeg 0. 01 [0.7 1] 0.00 [0.9 2] -0. 00 [0.9 3] -0 .02 [0.4 1]
MultI ndS eg -0. 02 [0. 81] 0. 06 [0. 41]
NegBo okValue 0. 95 [0. 00] 0. 95 [0.0 0] 1.66 [0.0 0] 0. 90 [0. 00] 0. 90 [0.0 0] 0.98 [0.0 0]
D_year 0. 05 [0. 34] 0. 05 [0.3 3] 0.07 [0.4 9] -0. 01 [0. 85] -0. 01 [0.8 4] 0.07 [0.3 2]
Obser vat ions 3011 .0 3011 .0 1045.0 3565 .0 3565 .0 1959.0
AdjRSq 0. 13 0. 13 0.15 0. 15 0. 15 0.16
samp le=Non-U.S. firms
Inter cept -0. 18 [0. 07] -0. 15 [0.0 7] -0 .01 [0.9 7] -0. 12 [0. 20] -0. 00 [0.9 9] 0.10 [0.4 1]
FX_De riv atives 0. 10 [0. 13] 0. 10 [0.1 3] 0.13 [0.3 3] 0. 04 [0. 47] 0. 04 [0.4 9] -0 .01 [0.8 7]
R_D_t o_Sales 0.41 [0.0 0] 0.20 [0.2 2]
CapEx 0. 15 [0. 22] 0. 15 [0.2 1] -0 .09 [0.7 5] 0. 55 [0. 00] 0. 54 [0.0 0] 0.46 [0.0 7]
Lever age -1. 93 [0. 00] -1. 94 [0.0 0] -2 .13 [0.0 0] -2. 26 [0. 00] -2. 25 [0.0 0] -2 .76 [0.0 0]
Divid end -0. 11 [0. 09] -0. 11 [0.0 8] -0 .28 [0.0 4] -0. 10 [0. 10] -0. 08 [0.1 6] -0 .09 [0.3 9]
ROA_3y -0. 14 [0. 19] -0. 13 [0.2 1] -0 .07 [0.7 4] 0. 07 [0. 48] 0. 07 [0.4 9] 0.16 [0.4 0]
Logas sets -0. 06 [0. 00] -0. 07 [0.0 0] -0 .05 [0.3 3] -0. 07 [0. 00] -0. 06 [0.0 0] -0 .08 [0.0 2]
Forei gn_Sales 0. 39 [0. 00] 0. 38 [0.0 0] 0.43 [0.0 1]
NumIn dSeg 0. 02 [0.2 1] 0.01 [0.7 1] -0. 01 [0.4 7] -0 .03 [0.2 5]
MultI ndS eg 0. 12 [0. 19] 0. 10 [0. 28]
NegBo okValue 0. 89 [0. 00] 0. 88 [0.0 0] 0.35 [0.6 7] 1. 01 [0. 00] 1. 02 [0.0 0] 1.21 [0.0 0]
D_year 0. 04 [0. 56] 0. 04 [0.5 5] 0.05 [0.6 9] 0. 09 [0. 09] 0. 08 [0.1 0] 0.29 [0.0 0]
Obser vat ions 2037 .0 2037 .0 541 .00 2440 .0 2440 .0 1106.0
AdjRSq 0. 12 0. 12 0.14 0. 16 0. 16 0.17
samp le=U .S. firms
Inter cept 0. 15 [0. 21] 0. 12 [0.3 2] 0.02 [0.9 0] -0. 06 [0. 67] -0. 11 [0.3 7] -0 .03 [0.8 2]
FX_De riv atives 0. 05 [0. 78] 0. 06 [0.7 3] 0.21 [0.4 1] 0. 01 [0. 88] 0. 01 [0.8 9] -0 .05 [0.6 8]
R_D_t o_Sales 0.70 [0.0 0] 0.97 [0.0 0]
CapEx 0. 10 [0. 59] 0. 10 [0.5 9] -0 .60 [0.0 5] 0. 43 [0. 17] 0. 44 [0.1 7] -0 .23 [0.6 6]
Lever age -2. 68 [0. 00] -2. 69 [0.0 0] -2 .65 [0.0 0] -3. 14 [0. 00] -3. 14 [0.0 0] -3 .21 [0.0 0]
Divid end -0. 20 [0. 07] -0. 20 [0.0 9] -0 .36 [0.0 5] -0. 08 [0. 43] -0. 10 [0.3 5] -0 .19 [0.1 2]
ROA_3y -0. 70 [0. 00] -0. 69 [0.0 0] 0.21 [0.5 4] 0. 52 [0. 03] 0. 53 [0.0 3] 1.17 [0.0 0]
Logas sets -0. 04 [0. 32] -0. 04 [0.3 4] 0.06 [0.2 7] 0. 05 [0. 14] 0. 05 [0.1 7] 0.11 [0.0 0]
Forei gn_Sales 0. 26 [0. 27] 0. 27 [0.2 4] 0.34 [0.2 4]
NumIn dSeg -0. 04 [0.2 8] -0 .03 [0.5 4] 0. 02 [0.5 3] 0.01 [0.7 5]
MultI ndS eg -0. 17 [0. 15] -0. 00 [0. 99]
NegBo okValue 0. 91 [0. 00] 0. 92 [0.0 0] 2.07 [0.0 0] 0. 86 [0. 00] 0. 85 [0.0 0] 0.94 [0.0 0]
D_year 0. 03 [0. 78] 0. 02 [0.8 1] 0.11 [0.4 6] -0. 12 [0. 20] -0. 12 [0.2 0] -0 .12 [0.3 0]
Obser vat ions 974. 00 974. 00 504 .00 1125 .0 1125 .0 853 .00
AdjRSq 0. 15 0. 15 0.15 0. 16 0. 16 0.17
(continued)

47
Inter cept
0. 08
[0. 47]
 [0.7 2]
0.04
[0.7 4]
0. 09
[0. 34]
0. 03
Table 8: Multivariate Analysis
[0.7 3] with Tobin’s Q (continued)
0.10
[0.5 1]
Panel C: Interest
CP_De rivRate Derivatives
atives Use
0. 06
IR_Ex pos ure = [0
0 . 69] IR_Ex pos ure = 1
0. 06
(01) (0 2) [0.6 9] (03) (01) (0 2) (03)
Va riab le Coef pva lue Coef pval ue-0 .08 Coef pval ue Coef pva lue Coef pval ue Coef pval ue
[0.6
ƒƒƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ 6]
ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒ
-0. 01
samp le=A ll count ries
[0. 91]
Inter cept -0. 10 [0. 41] 0. 03 [0.7 9]-0. -01
0 .05 [0.7 3] -0. 35 [0. 00] -0. 40 [0.0 0] -0 .31 [0.0 0]
IR_De riv atives 0. 08 [0. 43] [0.8 6]
0. 09 [0.3 6] 0.08 [0.6 0] 0. 04 [0. 08] 0. 05 [0.0 3] 0.09 [0.0 1]
R_D_t o_Sales -0 .040.49 [0.0 0] 1.95 [0.0 0]
[0.7 2]
CapEx 0. 45 [0. 00] 0. 43 [0.0 1] 0.00 [0.9 9] 0. 28 [0. 00] 0. 29 [0.0 0] -0 .13 [0.3 7]
R_D_t o_S ales
Lever age -3. 88 [0. 00] -4. 06 [0.0 0] -4 .93 [0.0 0] -1. 46 [0. 00] -1. 48 [0.0 0] -1 .62 [0.0 0]
Divid end -0. 29 [0. 00] -0. 22 [0.0 1] -0 .20 [0.1 4] 0. 11 [0. 00] 0. 08 [0.0 0] 0.06 [0.1 4]
ROA_3y 0. 11 [0. 48] 0. 10 [0.5 1] 0.44 [0.0 5] -0. 19 [0. 00] -0. 19 [0.0 0] 0.17 [0.1 0]
Logas sets -0. 00 [0. 89] 0. 01 [0.6 4] 0.08 [0.0 5] -0. 03 [0. 00] -0. 04 [0.0 0] -0 .03 [0.0 3]
Forei gn_Sales 0. 39 [0. 01] 0. 36 [0.0 1] 0.41 [0.0 6] 0. 08 [0. 10] 0. 08 [0.1 1] 0.06 [0.4 4]
NumIn dSeg -0. 08 [0.0 0] 0.84 -0 .09 [0.0 1] 0. 04 [0.0 0] 0.02 [0.0 2]
MultI ndS eg -0. 08 [0. 46] [0.0 0] 0. 10 [0. 00]
NegBo okValue 0. 70 [0. 08] 0. 78 [0.0 5] 0.85 [0.1 8] 0. 93 [0. 00] 0. 93 [0.0 0] 1.07 [0.0 0]
D_year 0. 34 [0. 00] 0. 33 [0.0 0] 0.42 [0.0 0] -0. 29 [0. 00] -0. 28 [0.0 0] -0 .29 [0.0 0]
Obser vat ions 2276 .0 2276 .0 1323.0 2480 .0 2480 .0 1099.0
AdjRSq 0. 05 0. 05 0.06 0. 29 0. 31 0.42
samp le=Non-U.S. firms
Inter cept -0. 30 [0. 08] -0. 04 [0.7 3]10 - .07
0 .09 [0.6 6] -0. 31 [0. 00] -0. 32 [0.0 0] -0 .04 [0.5 7]
IR_De riv atives 0. 09 [0. 45] [0.0-0
0. 11 [0.3 7] 0] .01 [0.9 6] 0. 05 [0. 08] 0. 05 [0.0 5] 0.11 [0.0 0]
CapEx
R_D_t o_Sales 0.23
0 . 54 [0.2 5] 2.46 [0.0 0]
CapEx 0. 34 [0. 08] 0. 30 [0.1 2]
[0. 01 0.17
] [0.6 1] 0. 46 [0. 00] 0. 45 [0.0 0] 0.43 [0.0 5]
Lever age -3. 62 [0. 00] -3. 81 [0.0 0] 0. -534 .78 [0.0 0] -1. 33 [0. 00] -1. 34 [0.0 0] -1 .43 [0.0 0]
[0.0 -01]
Divid end -0. 24 [0. 02] -0. 18 [0.1 0] .12 [0.5 2] 0. 04 [0. 17] 0. 03 [0.3 0] -0 .05 [0.3 0]
-0 .35
ROA_3y 0. 19 [0. 27] 0. 19 [0.2 6]
[0.3 1]0.31 [0.2 8] -0. 22 [0. 00] -0. 22 [0.0 0] 0.25 [0.0 1]
Logas sets -0. 10 [0. 00] -0. 07 [0.0 5]-0. -000 .09 [0.1 3] -0. 02 [0. 04] -0. 03 [0.0 0] -0 .00 [0.9 7]
Forei gn_Sales 0. 52 [0. 00] [0. 99
0. 49 [0.0 0] ]
0.55 [0.0 3] 0. 10 [0. 05] 0. 09 [0.0 7] 0.09 [0.2 5]
0. 05
NumIn dSeg -0. 08 [0.0 0] -0 .10 [0.0 2] 0. 03 [0.0 0] -0 .02 [0.1 0]
[0.7 2]
MultI ndS eg 0. 02 [0. 90] -0 .14 0. 13 [0. 00]
NegBo okValue 1. 69 [0. 00] [0.5 5]
1. 88 [0.0 0] 3.52 [0.0 0] 0. 92 [0. 00] 0. 92 [0.0 0] 0.66 [0.0 0]
D_year 0. 45 [0. 00] Lever 0.70
0. 44 [0.0 0] age [0.0 0] -0. 27 [0. 00] -0. 26 [0.0 0] -0 .24 [0.0 0]
-3. 25
Obser vat ions 1404 .0 1404 .0 663 .00 1586 .0 1586 .0 585 .00
[0. 00]
AdjRSq 0. 08 0. 08 -3. 250.11 0. 27 0. 28 0.50
samp le=U .S. firms [0.0 0]
Inter cept -0. 03 [0. 87] -0. 03 [0.8 7]-3 .34-0 .18 [0.4 5] -0. 37 [0. 00] -0. 42 [0.0 0] -0 .39 [0.0 0]
[0.0 0]
IR_De riv atives 0. 04 [0. 84] 0. 05 [0.8 0]-1. 240.14 [0.4 9] 0. 11 [0. 01] 0. 10 [0.0 1] 0.06 [0.3 4]
R_D_t o_Sales [0. 00 0.85
] [0.0 0] 1.42 [0.0 0]
CapEx 0. 67 [0. 03] 0. 66 [0.0 4]-1. -24
0 .41 [0.4 1] 0. 11 [0. 30] 0. 12 [0.2 7] -0 .28 [0.1 7]
Lever age -4. 89 [0. 00] -4. 97 [0.0 0][0.0 -50] .68 [0.0 0] -1. 77 [0. 00] -1. 76 [0.0 0] -1 .81 [0.0 0]
-0 .83
Divid end -0. 26 [0. 17] -0. 24 [0.2 1][0.0-0 0] .41 [0.0 6] 0. 11 [0. 01] 0. 10 [0.0 3] 0.08 [0.2 2]
ROA_3y -0. 08 [0. 79] -0. 09 [0.7 8] 0.61 [0.1 0]
Divid end -0. 34 [0. 01] -0. 34 [0.0 1] -0 .02 [0.9 1]
Logas sets 0. 13 [0. 01] 0. 13 [0.0 1] -00.24. 17 [0.0 0] -0. 07 [0. 00] -0. 07 [0.0 0] -0 .06 [0.0 0]
Forei gn_Sales 0. 08 [0. 81] [0. 09
0. 07 [0.8 4] -0 ].00 [0.9 9] -0. 00 [0. 99] 0. 01 [0.9 1] 0.09 [0.5 9]
-0. 17
NumIn dSeg -0. 04 [0.4 4][0.0 -09] .04 [0.5 1] 0. 02 [0.1 0] 0.03 [0.1 2]
MultI ndS eg -0. 12 [0. 50] -0 .22 0. 01 [0. 80]
NegBo okValue 0. 09 [0. 87] [0.0-0
0. 10 [0.8 6] 9] .17 [0.8 2] 0. 96 [0. 00] 0. 95 [0.0 0] 1.30 [0.0 0]
D_year 0. 19 [0. 19] 0. 18 [0.2 0]-0. 070.21 [0.1 9] -0. 28 [0. 00] -0. 28 [0.0 0] -0 .32 [0.0 0]
[0. 33]
Obser vat ions 872. 00 872. 00 -0.66 0 .00
10 894. 00 894. 00 514 .00
AdjRSq 0. 03 0. 03 [0.2 0]0.05 0. 35 0. 35 0.41
-0 .02 (continued)
[0.8 4]
ROA_3y
-0. 04
[0. 86]
-0. 04
[0.8 6] 48 CP_Ex pos ure = 0
0.55
[0.0 4]
0. 67
[0. 06]
0. 57 CP_Ex pos ure = 1
 0.89
(01)
[0.1 0]
(0 2)
Logas sets
(03)
0. 03
(01)
[0. 32]
(0 2)
0. 03
(03)
[0.3 3]
Table 8: Multivariate Analysis CoefTobin’s
with pva lue Q (continued)
0.12
Coef pval ue
[0.0 0]
Coef pval ue
-0. 06
Panel D: Commodity
[0. 02] Price Derivatives Use
Coef pva lue
Coef pval ue
-0. 06
Coef pval ue
[0.0 2]
-0 .09
[0.0 2]
Va riab le Forei gn_ Sales
ƒƒƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ
-0. 02 ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒƒƒ ƒƒƒƒ ƒƒ
samp le=A ll count ries [0. 93]
Inter cept -0. 01 [0. 87] 0. 03 [0.5 8]-0. 020.05 [0.5 5] 0. 13 [0. 03] 0. 03 [0.6 3] 0.25 [0.0 1]
[0.9 2]
CP_De riv atives 0. 04 [0. 66] 0. 04 [0.6 8] 0.01-0 .04 [0.7 8] -0. 05 [0. 22] -0. 04 [0.3 5] -0 .06 [0.3 9]
R_D_t o_Sales [0.9 5]0.58 [0.0 0] 1.80 [0.0 0]
CapEx 0. 51 [0. 00] 0. 50 [0.0 0] 0. -07
0 .04 [0.8 6] 0. 03 [0. 70] 0. 05 [0.5 6] 0.17 [0.2 9]
[0. 69]
Lever age -2. 65 [0. 00] -2. 65 [0.0 0] -3 .19 [0.0 0] -1. 17 [0. 00] -1. 17 [0.0 0] -1 .10 [0.0 0]
0. 05
Divid end -0. 14 [0. 00] -0. 12 [0.0 1][0.7 -09].12 [0.1 3] -0. 04 [0. 38] -0. 06 [0.1 8] -0 .17 [0.0 3]
ROA_3y 0. 01 [0. 95] 0. 00 [0.9 6]-0 .160.34 [0.0 3] -0. 08 [0. 48] -0. 09 [0.4 3] -0 .13 [0.5 3]
Logas sets -0. 03 [0. 03] -0. 03 [0.0 5][0.5 6]0.02 [0.4 1] -0. 01 [0. 36] -0. 02 [0.1 3] -0 .02 [0.4 1]
NumIn dSeg
Forei gn_Sales 0. 32 [0. 00] 0. 31 [0.0 0] 0.33 [0.0 2] -0. 12 [0. 12] -0. 13 [0.1 1] -0 .01 [0.9 5]
NumIn dSeg -0. 01 [0.5 1] -0 .02 [0.2 6] 0. 02 [0.0 4] 0.00 [0.9 4]
MultI ndS eg 0. 02 [0. 78] -0. 05 [0. 38]
NegBo okValue 1. 01 [0. 00] 1. 02 [0.0 0]-0. 001.27 [0.0 0] 0. 11 [0. 44] 0. 11 [0.4 3] -0 .19 [0.3 4]
D_year 0. 06 [0. 21] [0.9 1]
0. 06 [0.2 3] 0.13 [0.0 6] -0. 28 [0. 00] -0. 27 [0.0 0] -0 .31 [0.0 0]
-0 .01
Obser vat ions 4156 .0 4156 .0 2153.0
[0.7 4] 600. 00 600. 00 269 .00
AdjRSq 0. 15 0. 15 0.16 0. 27 0. 27 0.28
samp le=Non-U.S. firms
Inter cept -0. 11 [0. 24] 0. 04 [0.6 0] 0.07 [0.5 7] 0. 05 [0. 52] -0. 01 [0.8 9] 0.15 [0.1 8]
-0. 01
CP_De riv atives 0. 09 [0. 51] 0. 09 [0.5 3] 0.17 [0.5 0] 0. 04 [0. 52] 0. 04 [0.4 6] -0 .03 [0.7 3]
[0.6 1]
R_D_t o_Sales 0.030.36 [0.0 2] 0.32 [0.4 6]
CapEx 0. 50 [0. 00] [0.4 4]
0. 48 [0.0 0] 0.20 [0.4 6] 0. 01 [0. 95] 0. 01 [0.9 1] 0.24 [0.2 0]
Lever age -2. 32 [0. 00] MultI -ndS
-2. 31 [0.0 0] 2 .92eg[0.0 0] -1. 09 [0. 00] -1. 11 [0.0 0] -1 .05 [0.0 0]
-0. 06
Divid end -0. 12 [0. 04] -0. 10 [0.0 9] -0 .11 [0.3 5] 0. 05 [0. 40] 0. 03 [0.5 7] -0 .07 [0.4 6]
[0. 54]
ROA_3y 0. 02 [0. 82] 0. 02 [0.8 5] 0.23 [0.2 5] -0. 23 [0. 04] -0. 23 [0.0 5] -0 .45 [0.0 1]
Logas sets -0. 08 [0. 00] -0. 07 [0.0 0] -0 .08 [0.0 2] -0. 00 [0. 93] -0. 01 [0.6 7] -0 .00 [0.9 2]
Forei gn_Sales 0. 42 [0. 00] 0. 42 [0.0 0] 0.46 [0.0 1] -0. 20 [0. 01] -0. 20 [0.0 1] -0 .02 [0.8 8]
NumIn dSeg -0. 02 [0.2 5] -0 .03 [0.2 5] 0. 02 [0.1 0] 0.01 [0.6 8]
MultI ndS eg 0. 10 [0. 26] 0. 01 [0. 90]
NegBo okValue 1. 15 [0. 00] 1. 17 [0.0 0]-0. 141.34 [0.0 0] 0. 69 [0. 00] 0. 69 [0.0 0] 0.31 [0.3 0]
D_year 0. 14 [0. 00] [0. 12
0. 13 [0.0 1] ]
0.35 [0.0 0] -0. 36 [0. 00] -0. 35 [0.0 0] -0 .28 [0.0 0]
Obser vat ions 2625 .0 2625 .0 1082.0 365. 00 365. 00 166 .00
AdjRSq 0. 16 0. 16 0.17 0. 30 0. 31 0.29
samp le=U .S. firms

NegBo okValue
0. 87
[0. 00]
0. 87
[0.0 0]
1.31
[0.0 0]
-0. 06
[0. 74]
-0. 09
[0.6 4]
-0 .15
[0.5 2]
D_year
-0. 02
[0. 85]
-0. 02
[0.8 4]
-0 .00
[0.9 9]
-0. 16
[0. 02]
-0. 16
[0.0 1]
-0 .43 49
[0.0 0]
Obser vat ions
1531 .0
 107 1.0

235. 00
Appendix
235. 00
Table A-1: Variable Definitions and Hypotheses
The table reports the independent variables of the study and103their
.00definition. The second column indicates the expected sign
of the relationship with derivatives use (+: positive, -: negative, ?: indeterminate). Panel A refers to variables for incentives
of hedging. Panel B lists proxies of exposure. Panel CAdjRSqpresents country-level characteristics of the legal origin. Panel D
0. 15
specifies variables of shareholder right protection. Panel E reports variables of creditor right protection. Panel F lists proxies
of law enforcement. Panel G reports measures of ownership0.concentration, and Panel H presents control variables. A suffix
15
of “_3y” (“_5y”) to a variable indicates a three- (five-) year average.
Variable Prediction 0.17 Definition
Panel A: Incentives for Hedging
0. 28
Multiple Share Class + Dummy variable with value 1 if currently multiple share classes exist; 0 otherwise
Multiple Common Shares + Dummy variable with value
0. 271 if multiple share classes existed; 0 otherwise
Stock Options ? Dummy variable with value 1 if stock options are reported in the annual report; 0 otherwise
0.57
R&D to Sales + Research and Development Expense / Net Sales or Revenues
R&D to Size + Research and Development Expense / Size
PPE to Sales + Property, Plant, and Equipment - Total (Gross) / Net Sales or Revenues
PPE to Size + Property, Plant, and Equipment - Total (Gross) / Size
Capital Expenditures + Capital Expenditures / Net Sales or Revenues
Market to Book + Market Price-Year End / Book Value Per Share
Log Market to Sales + Natural logarithm of (Market Capitalization- Year End / Net Sales or Revenues)
Net Assets from + Net Assets from Acquisitions / Size; Net Assets from Acquisitions includes: (1) Net assets of ac-
Acquisi- tions quired companies (2) Additions to fixed assets from acquisitions (3) Working capital of companies
acquired (if shown as both a source and a use, both numbers are netted against each other) (4)
Excess of cost of acquired companies (5) Discount on acquisitions
Earnings Yield - Earnings Per Share / Market Price-Year End
Debt Maturity + Total Long-Term Debt / Total Debt. Long-term debt represents debt obligations due more than one
year from the company's balance sheet date or due after the current operating cycle
Cash Flow - Funds from Operations / Net Sales or Revenues
Interest Coverage - EBIT / Interest Expense on Debt
Fixed Charge Coverage - Earnings before Interest and Taxes / (Interest Expense on Debt + (Preferred Dividends (Cash)) /
1- (Tax Rate / 100))
Leverage + Total Debt / Size
Quick Ratio - (Cash & Equivalents + Receivables (Net)) / Current Liabilities-Total
Current Ratio - Current Assets-Total / Current Liabilities-Total
Dividend Yield ? Dividends Per Share / Market Price-Year End
Dividend Payout ? Common Dividends (Cash) / (Net Income before Preferred Dividends - Preferred Dividend Re-
quirement)
Dividend ? Dummy variable with value 1 if dividend yield, dividend payout or dividend per share is positive; 0
otherwise
Convertible Debt ? Convertible Long-Term Debt / Size
Preferred Stock ? Preferred Stock / Size
Gross Profit Margin - Gross Income / Net Sales or Revenues
Logsales ? Natural logarithm of Net Sales or Revenues
ROA - (Net Income before Preferred Dividends + ((Interest Expense on Debt-Interest Capitalized) * (1-
Tax Rate))) / Last Year's Total Assets
Tangible Assets - (Total Assets - Intangibles) / Total Assets
Logassets ? Natural logarithm of Total Assets
Logcapex ? Natural logarithm of Capital Expenditures (Cash Flow Statement)
SGA Expenses + (Selling, General and Administrative Expenses - Research and Development Expense) / Net Sales
or Revenues
Logsize ? Natural logarithm of the sum of market capitalization, total debt and preferred stock
(continued)

50

Variable
Income Tax Credit
Income Tax
Credit
Dummy
Tax Rate
Panel B: Exposure
Foreign Assets
Foreign Income
Foreign Sales
Exchange Rate Exposure
Interest Rate Exposure
Commodity Price
Expo- sure
Exposure
Panel C: Legal Origin
Civil Law
English Common Law
French Civil Law
German Civil Law
Scandinavian Civil Law
Panel D: Shareholder Rights
One Share – One Vote
Proxy by Mail Allowed
Shares Not Blocked
before Meeting
Cumulative Voting/ Pro-
portional Representation
Oppressed Minorities
Mechanism
Preemptive Right to
New
Issues
Percentage of Share
Capital to Call an Ex-
traordinary Shareholder
Meeting
Antidirector Rights
Mandatory Dividend
Table A-1: Variable Definitions and Hypotheses (continued)
Prediction Definition
+ Includes: (1) Tax losses carryforward/carrybackward (2) Royalty tax credits (3) Research and
development tax credits
+ Dummy variable with value 1 if income tax credits exist; 0 otherwise
- Income Taxes / Pretax Income
+ International Assets / Total Assets
+ International Operating Income / Operating Income
+ International Sales / Net Sales or Revenues
+ Dummy variable with value 1 if any foreign assets, foreign income or foreign sales are reported; 0
otherwise
+ Dummy variable with value 1 if the firm has leverage higher then the median leverage in its coun-
try; 0 otherwise
+ Dummy variable with value 1 if the firm is in one of the industries chemicals, mines, oil, steel, or
utilities; 0 otherwise
+ Dummy variable with value 1 if any of the dummy variables for foreign exchange rate exposure,
interest rate exposure or commodity price exposure are 1; 0 otherwise
- Dummy variable with value 1 if the legal origin of the country is civil law; 0 otherwise (from La
Porta et al., 1998)
+ Dummy variable with value 1 if the legal origin of the country is English common law; 0 otherwise
(from La Porta et al., 1998)
- Dummy variable with value 1 if the legal origin of the country is French civil law; 0 otherwise (from
La Porta et al., 1998)
? Dummy variable with value 1 if the legal origin of the country is German civil law; 0 otherwise (from
La Porta et al., 1998)
? Dummy variable with value 1 if the legal origin of the country is Scandinavian civil law; 0 otherwise
(from La Porta et al., 1998)
+ Dummy variable with value 1 if ordinary shares have to carry one vote per share; 0 otherwise
(from La Porta et al., 1998)
+ Dummy variable with value 1 if shareholders can mail their proxy vote to the firm; 0 otherwise
(from La Porta et al., 1998)
+ Dummy variable with value 1 if firms cannot block shareholders from selling their shares before a
general shareholders meeting; 0 otherwise (from La Porta et al., 1998)
+ Dummy variable with value 1 if cumulative voting by shareholders for the board of directors or
proportional representation is allowed (from La Porta et al., 1998)
+ Dummy variable with value 1 if mechanisms for the protection of minority shareholders exist (from
La Porta et al., 1998)
+ Dummy variable with value 1 if shareholders have the first opportunity to buy new issues of stock
(from La Porta et al., 1998)
+ The minimum percentage of ownership capital required to call for an extraordinary meeting (from
La Porta et al., 1998)
+ Aggregate index of shareholder right protection with values from 0 (low) to 6 (high) (from La Porta
et al., 1998)
+ Percentage of net income that has to be distributed to shareholders as dividend; 0 if no restriction
exists (from La Porta et al., 1998)
(continued)
51
 Table A-1: Variable Definitions and Hypotheses (continued)

Panel E: Creditor
Rights
Restrictions for Going
into Reorganization
No Automatic Stay on
Secured Assets
Secured Creditors Paid
First
Management Does Not
Stay in Reorganization
Creditor Rights
Legal Reserve
- Dummy variable with value 1 if reorganization imposes restrictions, such as creditors’ consent
(from La Porta et al., 1998)
- Dummy variable with value 1 if secured creditors are not prevented from access to their security in
reorganization (from La Porta et al., 1998)
- Dummy variable with value 1 if secured creditors rank first in the distribution of the proceeds from
the disposition of the assets of a bankrupt firm (from La Porta et al., 1998)
- Dummy variable with value 1 if management is replaced during reorganization (from La Porta et
al., 1998)
- Aggregate index of creditor right protection with values from 0 (low) to 4 (high) (from La Porta et
al., 1998)
- The minimum percentage of total share capital required to avoid dissolution of an existing firm
(from La Porta et al., 1998)

Panel F: Law
Enforcement
- Index of the efficiency and integrity of the legal environment with values from 0 (low) to 10 (high)
Efficiency of Judicial (from La Porta et al., 1998)
System
Rule of Law - Index of tradition for law and order with values from 0 (low) to 10 (high) (from La Porta et al., 1998)
Corruption + Index of corruption in government with values from 0 (low) to 10 (high) (from La Porta et al., 1998)
Risk of Expropriation - Index of the risk of expropriation with values from 0 (high) to 10 (low) (from La Porta et al., 1998)
Risk of Contract - Index of the risk of repudiation of contracts by the government with values from 0 (high) to 10 (low)
Repu- diation (from La Porta et al., 1998)

Panel G: Ownership Concentration

Ownership by Three + Median percentage of common shares owned by the three largest shareholders in the ten largest
Largest nonfinancial firms (from La Porta et al., 1998)
Shareholders
Widely Held - Fraction of the 20 largest firms in each country that have no controlling shareholder (holding 20%
or more of the voting rights) (from La Porta et al., 1999)

Panel H: Control Variables

Accounting Standards ? Index on the inclusion or omission of 90 items in companies’ annual reports (from La Porta et al.,
1998)
Emerging Market ? Dummy variable with value 1 if the country is classified as emerging market by IFC/S&P; 0 other-
wise
OECD ? Dummy variable with value 1 if the country is classified as OECD country; 0 otherwise
LogGNP ? Natural logarithm of GNP/capita (from La Porta et al., 1998)
Investment Grade ? Dummy variable with value 1 if the country credit rating by S&P is BBB- or better; 0 otherwise
Disclosure ? Average disclosure and transparency decile score (from S&P)
Number of Industry ? Number of business segments (SIC codes) that make up the company's revenue (between 1 and
Segments 8)
Multiple Industry ? Dummy variable with value 1 if the firm has several business segments; 0 otherwise
Seg- ments
Foreign Listing ? Dummy variable with value 1 if the firm has a foreign listing (ADR, GDR, NYS); 0 otherwise
ADR ? Dummy variable with value 1 if the firm has an ADR; 0 otherwise
GDR ? Dummy variable with value 1 if the firm has a GDR; 0 otherwise
NYS ? Dummy variable with value 1 if the firm has a foreign listing on the New York Stock exchange; 0
otherwise
Negative Book Value ? Dummy variable with value 1 if the firm has negative book value of equity; 0 otherwise
USROW ? Dummy variable with value 1 if the firm is incorporated in the United States; 0 otherwise
D_year ? Dummy variable with value 1 if observation is of year 2000; 0 otherwise
52
 Table A-2: Descriptive Statistics for Explanatory Variables
The table shows mean values of various company characteristics by country, region, and for all firms. All accounting data are in
millions of U.S. dollars. Definitions of all variables are reported in Table A-1. Other countries are Bahamas, Bermuda, Cayman
Islands, Egypt, Indonesia, Jordan, Peru, Portugal, Turkey, and Venezuela.

Mult. Log Earni ngs Cash

Share St ock R &D\ R&D\ PPE\ PPE\ Cap. Mar ket\ (Mar ket\ Acqu. yi eld Debt Flow
Class Opti ons Sal es Size Sa les Size Exp. Book Sa les) As set 3yr Mat 3yr
ƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ
Arg enti na 0.818 0.364 0.0 00 0.000 2.706 1.226 0.177 0.866 -0 .042 0. 000 -0. 075 0.613 0.186
Aus tral ia 0.013 0.875 0.0 92 0.012 1.132 0.548 0.138 2.592 0.294 0. 026 -0. 277 0.649 -0 .255
Aus tria 0.136 0.432 0.0 44 0.023 0.932 1.023 0.097 1.631 -0 .420 0. 015 -0. 107 0.441 -0 .017
Bel gium 0.292 0.708 0.0 91 0.040 0.771 0.751 0.119 2.096 -0 .404 0. 015 -0. 090 0.482 0.020
Bra zil 1.000 0.368 0.0 05 0.004 1.541 0.990 0.117 1.109 -0 .468 0. 004 -0. 158 0.609 -0 .011
Can ada 0.184 0.938 0.2 87 0.040 1.495 0.755 0.206 2.206 0.243 0. 026 -0. 225 0.663 -0 .197
Chi le 0.214 0.214 0.0 08 0.003 2.346 0.919 0.099 1.505 0.045 0. 000 -0. 005 0.690 0.165
Chi na 0.750 0.167 0.0 13 0.006 2.105 1.140 0.232 1.005 0.036 0. 001 -0. 170 0.367 -0 .006
Cze ch Repub lic 0.000 0.000 0.0 00 0.000 1.909 2.547 0.225 0.709 -1 .080 0. 000 -0. 207 0.571 0.001
Denmark 0.477 0.511 0.4 37 0.058 0.909 0.725 0.143 2.751 -0 .053 0. 026 -0. 146 0.571 -0 .096
Fin land 0.400 0.543 0.0 46 0.027 0.645 0.766 0.086 2.425 -0 .448 0. 022 -0. 059 0.665 0.045
Fra nce 0.086 0.864 0.1 23 0.057 0.460 0.440 0.094 4.302 0.202 0. 021 -0. 084 0.561 0.002
Germany 0.124 0.663 0.1 46 0.068 0.561 0.684 0.125 2.393 -0 .021 0. 017 -0. 219 0.444 -0 .098
Gre ece 0.263 0.105 0.0 07 0.004 1.451 0.483 0.469 3.721 0.735 0. 001 0.006 0.408 0.050
Hong Kong 0.003 0.920 0.0 69 0.012 1.245 0.827 0.122 1.614 -0 .035 0. 011 -0. 353 0.355 -0 .214
Hun gary 0.071 0.214 0.0 14 0.004 0.911 1.007 0.181 1.064 -0 .567 0. 011 0.026 0.566 0.037
Ind ia 0.000 0.705 0.0 07 0.004 0.962 0.741 0.108 2.673 0.056 0. 010 -0. 085 0.646 0.122
Ire land 0.039 0.961 0.1 09 0.028 1.213 0.718 0.159 2.096 -0 .046 0. 026 -0. 214 0.616 -0 .169
Isr ael 0.000 0.897 0.2 15 0.065 0.677 0.370 0.107 1.375 0.799 0. 024 -0. 571 0.431 -0 .475
Ita ly 0.320 0.680 0.0 62 0.036 0.758 0.542 0.098 2.899 0.173 0. 009 -0. 180 0.448 0.021
Jap an 0.000 0.214 0.0 32 0.027 0.989 0.841 0.057 2.369 -0 .349 0. 001 -0. 023 0.489 0.016
Kor ea, Repu blic of 0.000 0.480 0.0 10 0.008 1.556 1.139 0.133 0.767 -0 .952 0.000 -0. 187 0.457 0.069
Lux embourg 0.182 0.818 0.0 57 0.033 0.882 0.400 0.202 1.072 0.581 0. 020 -0. 506 0.679 -0 .167
Mal aysia 0.007 0.645 0.0 05 0.003 1.839 0.939 0.088 1.332 -0 .063 0. 010 -0. 121 0.369 0.010
Mex ico 0.718 0.385 0.0 01 0.002 1.303 1.252 0.085 1.375 -0 .507 0. 016 -0. 016 0.752 0.139
Net herl ands 0.015 0.793 0.1 97 0.060 0.650 0.666 0.097 2.894 -0 .359 0. 027 -0. 120 0.548 -0 .037
New Zea land 0.022 0.556 0.0 02 0.004 1.721 0.870 0.096 2.120 0.039 0. 025 -0. 135 0.763 0.012
Norway 0.151 0.593 0.3 31 0.026 1.296 0.669 0.239 2.235 0.043 0. 020 -0. 183 0.752 -0 .076
Oth er count ries 0.400 0.433 0.0 35 0.008 1.813 0.796 0.127 1.352 -0 .104 0. 001 -0. 361 0.655 -0 .215
Phi lipp ines 0.286 0.643 0.0 00 0.000 2.067 1.178 0.281 0.917 -0 .058 0. 000 -0. 162 0.626 0.077
Pol and 0.071 0.143 0.0 14 0.005 1.012 0.813 0.123 1.688 -0 .276 0. 019 0.007 0.629 0.072
Sin gapo re 0.027 0.898 0.0 31 0.014 1.367 0.870 0.109 1.465 -0 .221 0. 012 -0. 176 0.404 -0 .051
Sou th Africa 0.086 0.810 0.0 05 0.005 0.704 0.572 0.109 2.535 -0 .195 0. 043 -0. 029 0.525 0.090
Spa in 0.069 0.448 0.0 15 0.007 1.714 0.921 0.176 2.721 0.086 0. 006 0.039 0.661 0.146
Swe den 0.545 0.483 0.2 55 0.058 0.682 0.440 0.113 3.028 0.392 0. 030 -0. 216 0.737 -0 .150
Swi tzer land 0.556 0.669 0.1 31 0.049 0.722 0.625 0.082 2.779 0.049 0. 033 -0. 092 0.575 0.024
Tha iland 0.962 0.154 0.0 00 0.000 1.793 0.885 0.104 1.381 -0 .177 0. 000 -0. 171 0.652 0.177
Uni ted King dom 0.029 0.983 0.2 24 0.041 0.846 0.514 0.130 2.955 0.266 0. 042 -0. 116 0.558 -0 .107
Uni ted Stat es 0.111 0.970 0.1 56 0.040 0.826 0.473 0.132 2.997 0.311 0. 021 -0. 095 0.755 -0 .020

US & Canada 0.126 0.963 0.1 69 0.040 0.936 0.520 0.145 2.830 0.299 0. 022 -0. 122 0.737 -0 .057
Eur ope 0.163 0.757 0.1 84 0.047 0.798 0.605 0.126 2.778 0.072 0. 031 -0. 138 0.553 -0 .068
Asia & Paci fic 0.045 0.660 0.0 43 0.017 1.336 0.821 0.104 1.884 -0 .098 0. 011 -0. 183 0.470 -0 .080
Afr ica/ Midd le East 0.039 0.852 0.1 24 0.038 0.718 0.506 0.110 1.887 0.236 0.035 -0. 318 0.492 -0 .213
Lat in Amer. /Carib. 0.656 0.387 0.0 11 0.003 1.712 1.146 0.106 1.161 -0 .330 0.009 -0. 141 0.683 0.036

OECD 0.131 0.821 0.1 54 0.039 0.906 0.586 0.131 2.747 0.151 0. 024 -0. 130 0.638 -0 .065
Non-OECD 0.094 0.759 0.0 51 0.014 1.442 0.860 0.113 1.525 -0 .064 0. 012 -0. 227 0.417 -0 .084
Uni ted Stat es 0.111 0.970 0.1 56 0.040 0.826 0.473 0.132 2.997 0.311 0. 021 -0. 095 0.755 -0 .020
Non-US 0.131 0.741 0.1 36 0.034 1.081 0.709 0.126 2.353 0.027 0. 022 -0. 168 0.537 -0 .089

All fir ms 0.125 0.811 0.1 45 0.037 0.997 0.631 0.128 2.551 0.116 0. 022 -0. 146 0.603 -0 .068
(continued)

53
 Table A-2: Descriptive Statistics for Explanatory Variables (continued)

FC- Div.
Cover age Charge Di v. Pa yout Conv. Pref. Marg in Log RO A Tang.
3yr 3yr Leverage Quick Curr ent Yie ld 3yr Div. Debt Stock 3yr Sales 3yr Asset
ƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ
Arg enti na 1.723 1.723 0.491 0.801 1.807 0.0 17 0.362 0.636 0.000 0.000 0.2 12 6.400 -0. 033 0.983
Aus tral ia -1. 227 -1.265 0.243 1.641 2.064 0.0 25 0.282 0.561 0.004 0.005 -0.2 20 4.723 -0. 382 0.875
Aus tria 2.177 2.177 0.329 1.221 1.678 0.0 25 0.255 0.659 0.000 0.000 -0.0 96 5.502 -0. 098 0.885
Bel gium 2.786 2.779 0.349 1.085 1.539 0.0 16 0.228 0.646 0.002 0.000 -0.1 96 5.663 -0. 026 0.858
Bra zil 0.180 0.180 0.498 0.890 1.203 0.0 20 0.239 0.632 0.002 0.000 0.0 97 7.089 -0. 075 0.966
Can ada -1. 384 -1.361 0.274 1.949 2.517 0.0 07 0.060 0.277 0.009 0.008 -0.1 81 4.914 -0. 187 0.892
Chi le 3.477 3.477 0.403 1.090 1.628 0.0 28 0.368 0.929 0.000 0.000 0.3 31 6.599 0. 042 0.946
Chi na 0.428 0.412 0.438 1.315 1.668 0.0 34 0.213 0.639 0.002 0.000 0.1 24 5.424 -0. 189 0.981
Cze ch Repub lic 2.434 2.434 0.330 1.051 1.523 0.0 17 0.152 0.478 0.000 0.000 -0.1 77 5.429 -0. 080 0.984
Denmark 2.196 2.196 0.318 1.633 2.120 0.0 14 0.173 0.614 0.001 0.000 -0.0 82 5.226 -0. 079 0.920
Fin land 4.031 3.969 0.302 1.306 1.860 0.0 32 0.302 0.800 0.007 0.000 -0.0 81 5.470 -0. 022 0.908
Fra nce 2.987 2.964 0.247 1.254 1.592 0.0 11 0.171 0.667 0.013 0.000 -0.0 01 6.119 -0. 020 0.794
Germany 0.039 0.021 0.233 2.191 2.816 0.0 12 0.153 0.415 0.005 0.002 -0.2 48 4.817 -0. 157 0.848
Gre ece 5.246 5.185 0.207 1.191 1.591 0.0 17 0.326 0.842 0.000 0.000 0.2 01 5.585 0. 010 0.957
Hong Kong -0. 834 -0.827 0.303 1.812 2.257 0.0 20 0.170 0.478 0.009 0.002 -0.0 59 4.344 -0. 367 0.970
Hun gary 4.011 4.011 0.237 1.632 2.300 0.0 08 0.126 0.500 0.000 0.000 0.2 44 5.270 0. 023 0.980
Ind ia 3.582 3.547 0.302 1.734 2.292 0.0 24 0.207 0.864 0.000 0.004 0.1 41 5.813 -0. 042 0.987
Ire land -0. 563 -0.594 0.345 1.302 1.659 0.0 16 0.103 0.471 0.004 0.011 -0.0 86 5.344 -0. 151 0.849
Isr ael -5. 034 -5.036 0.214 3.360 3.843 0.0 05 0.021 0.132 0.003 0.000 -0.3 97 4.190 -0. 559 0.917
Ita ly 3.457 3.457 0.286 1.403 1.779 0.0 17 0.212 0.710 0.004 0.000 0.0 74 5.760 -0. 100 0.869
Jap an 3.786 3.841 0.340 1.203 1.656 0.0 10 0.246 0.879 0.023 0.000 0.2 05 7.799 0. 003 0.981
Kor ea, Repu blic of 0.904 0.888 0.585 1.038 1.453 0.0 32 0.157 0.680 0.007 0.003 0.1 00 7.448 -0. 094 0.965
Lux embourg -0. 157 -0.157 0.366 2.275 2.392 0.0 08 0.189 0.364 0.019 0.000 -0.1 64 6.120 -0. 292 0.827
Mal aysia 1.310 1.314 0.378 1.539 2.015 0.0 18 0.140 0.672 0.008 0.000 0.0 79 4.279 -0. 088 0.969
Mex ico 2.734 2.734 0.378 1.447 2.059 0.0 13 0.124 0.564 0.001 0.000 0.3 10 7.109 0. 031 0.916
Net herl ands 2.128 2.051 0.279 1.447 1.879 0.0 22 0.137 0.585 0.020 0.006 -0.0 12 5.998 -0. 037 0.889
New Zea land 1.694 1.691 0.337 1.003 1.636 0.0 36 0.312 0.778 0.016 0.000 -0.0 56 5.070 -0. 122 0.897
Nor way 0.192 0.192 0.352 1.711 2.068 0.0 13 0.109 0.395 0.011 0.001 -0.2 14 4.913 -0. 117 0.909
Oth er count ries -1. 148 -1.148 0.413 1.342 2.209 0.0 14 0.177 0.433 0.002 0.000 -0.1 46 5.664 -0. 236 0.926
Phi lipp ines 0.722 0.693 0.533 0.854 1.270 0.0 07 0.097 0.429 0.016 0.005 0.0 26 5.135 0. 005 0.975
Pol and 4.886 4.623 0.191 1.174 1.568 0.0 08 0.085 0.429 0.017 0.000 0.0 58 5.816 -0. 021 0.946
Sin gapo re 1.451 1.508 0.303 1.497 1.937 0.0 20 0.241 0.655 0.003 0.001 -0.0 08 4.415 -0. 221 0.985
Sou th Africa 4.009 4.071 0.247 1.399 1.791 0.0 25 0.203 0.724 0.005 0.000 0.0 03 6.190 -0. 032 0.889
Spa in 5.503 5.500 0.336 0.800 1.127 0.0 25 0.325 0.931 0.002 0.002 0.1 60 6.888 0. 061 0.907
Swe den 0.527 0.517 0.203 1.879 2.423 0.0 14 0.168 0.476 0.009 0.000 -0.2 56 5.038 -0. 190 0.845
Swi tzer land 3.966 3.934 0.251 1.652 2.287 0.0 15 0.236 0.726 0.008 0.000 0.1 03 6.006 -0. 054 0.885
Tha iland 1.866 1.866 0.505 1.556 2.643 0.0 26 0.109 0.500 0.014 0.003 0.3 15 4.875 0. 028 0.943
Uni ted King dom 1.013 0.981 0.188 1.788 2.202 0.0 23 0.210 0.619 0.005 0.007 0.0 41 4.931 -0. 138 0.834
Uni ted Stat es 0.493 0.997 0.235 1.996 2.676 0.0 08 0.072 0.343 0.010 0.008 0.2 20 6.210 -0. 056 0.824

US & Ca nada 0.097 0.500 0.242 1.987 2.645 0.0 08 0.070 0.329 0.010 0.008 0.1 36 5.963 -0. 084 0.838
Eur ope 1.563 1.535 0.241 1.690 2.158 0.0 18 0.190 0.588 0.006 0.003 -0.0 52 5.264 -0. 109 0.857
Asia & Paci fic 1.030 1.043 0.328 1.504 1.971 0.0 19 0.205 0.657 0.010 0.002 0.0 17 5.279 -0. 191 0.957
Afr ica/ Midd le East -0. 835 -0.807 0.232 2.269 2.913 0.0 16 0.173 0.406 0.004 0.000 -0.2 10 5.127 -0. 316 0.901
Lat in Amer. /Carib. 1.192 1.192 0.422 1.164 1.829 0.0 18 0.194 0.591 0.001 0.000 0.1 46 6.677 -0. 072 0.938

OECD 0.884 1.060 0.251 1.784 2.340 0.0 13 0.128 0.486 0.009 0.005 0.0 45 5.736 -0. 103 0.859
Non-OECD 0.487 0.502 0.336 1.648 2.165 0.0 19 0.175 0.578 0.006 0.001 -0.0 03 4.635 -0. 218 0.967
Uni ted Stat es 0.493 0.997 0.235 1.996 2.676 0.0 08 0.072 0.343 0.010 0.008 0.2 20 6.210 -0. 056 0.824
Non-US 0.965 0.959 0.278 1.656 2.147 0.0 17 0.176 0.570 0.008 0.003 -0.0 44 5.255 -0. 151 0.897

All fir ms 0.820 0.971 0.264 1.762 2.312 0.0 14 0.134 0.500 0.009 0.005 0.0 37 5.554 -0. 122 0.877
(continued)

54

Log
 Tax
For gn
Inv est
sset Log SGA Cr edit Tax Rate For gn Inc Fo rgn FX Num Fo rgn ment

Table A-2: Descriptive Statistics for Explanatory Variables (continued)

Log A Disclo
Size s CapEx Exp. Dummy Cred it 3yr Ass et 3yr Sa les Exp osure IndSeg Li st. Gr ade sure
ƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒ ƒƒƒƒ ƒƒƒƒƒƒ ƒƒƒƒƒ
Arge ntina 7. 161 7.381 4.551 0.141 0.000 0.0 00 0.324 0.0 00 0. 000 0.000 4.818 0. 818 0.00 0 3.000
Aust ralia 5. 027 4.902 1.761 0.326 0.020 0.1 06 0.308 0.2 24 0.2 02 0. 258 0.297 3.587 0. 165 1.00 0 7.000
Aust ria 5. 543 5.722 2.846 0.254 0.023 0.0 59 0.326 0.4 90 0.5 41 0. 626 0.659 4.545 0. 273 1.00 0 5.000
Belg ium 5. 696 5.651 3.022 0.290 0.015 0.0 06 0.286 0.2 00 0.0 00 0. 606 0.492 3.554 0. 046 1.00 0 5.000
Braz il 7. 312 7.451 4.369 0.165 0.105 0.1 13 0.217 0.0 00 0.0 00 0. 219 0.211 4.263 0. 474 0.00 0 4.000
Cana da 5.343 5.175 2. 392 0.311 0.043 0.0 79 0.351 0.1 93 0.1 12 0. 422 0.419 2.783 0. 000 1. 000
Chile 7. 290 7.280 4.147 0.206 0.000 0.0 00 0.234 0. 811 0.071 3.857 0. 786 1.00 0 4.000
China 6. 170 6.348 3.188 0.165 0.000 0.0 00 0.190 0.0 04 0.0 47 0. 088 0.139 3.917 0. 278 5.000
Czech Republ ic 4. 758 5.671 3.139 0.080 0.000 0.0 00 0.299 0.0 00 0.0 00 0. 044 0.087 5.174 0. 087 1. 000
Denmark 5. 454 5.312 2.224 0.278 0.068 0.2 00 0.292 0.4 12 0.9 41 0. 670 0.466 3.227 0. 011 1.00 0 5.000
Finl and 5. 268 5.345 2.578 0.211 0.057 0.1 27 0.294 0.0 00 0.0 00 0. 578 0.629 3.581 0. 095 1.00 0 7.000
Fran ce 6. 631 6.288 3.256 0.281 0.019 0.1 12 0.372 0.3 78 0.9 28 0. 549 0.753 4.420 0. 204 1.00 0 6.000
Germany 5. 144 5.101 2.102 0.284 0.007 0.1 21 0.388 0.2 82 0.3 40 0. 457 0.519 3.910 0. 058 1.00 0 5.000
Gree ce 6. 570 6.131 4.155 0.148 0.000 0.0 00 0.348 0.0 00 0.0 00 0. 013 0.053 4.737 0. 158 1.00 0 4.000
Hong Kong 4. 620 4.875 1.293 0.360 0.012 0.0 06 0.142 0.3 32 0.4 02 0. 548 0.658 4.796 0. 165 1.00 0 5.000
Hung ary 5. 004 5.263 3.085 0.123 0.071 1.5 75 0.103 0.0 41 0.0 00 0. 277 0.429 4.786 0. 643 1. 000
India 6. 412 6.218 3.100 0.153 0.000 0.0 00 0.168 0.0 00 0.0 00 0. 054 0.045 4.659 0. 500 1.00 0 4.000
Irel and 5. 319 5.543 2.620 0.341 0.000 0.0 00 0.236 0.3 22 0.5 98 0. 651 0.569 2.686 0. 353 1.00 0 8.000
Isra el 5. 423 4.858 1.965 0.370 0.000 0.0 00 0.285 0.1 07 -0.0 11 0.763 0.309 2.822 0. 059 1. 000
Italy 6. 331 6.084 2.721 0.313 0.040 0.4 15 0.420 0.0 99 0.1 02 0. 475 0.500 4.450 0. 160 1.00 0 5.000
Japan 8. 046 7.933 4.503 0.184 0.003 0.0 01 0.469 0.1 59 0.1 91 0. 203 0.596 5.160 0. 242 1. 000
Kore a, Repub lic of 7. 741 8.089 5.297 0.135 0.000 0.0 00 0.315 0.0 28 0. 181 0.040 3.720 0. 360 1.00 0 5.000
Luxe mbou rg 6.698 6.798 3. 371 0.222 0.000 0.0 00 0.207 0.4 12 0.8 03 0. 983 0.455 3.000 0. 182 1. 000
Mala ysia 4. 798 5.082 1.137 0.174 0.007 0.0 01 0.211 0.1 10 0.1 08 0. 164 0.351 5.111 0. 041 1.00 0 5.000
Mexi co 7.247 7.492 4. 309 0.205 0.051 0.1 15 0.297 0.2 45 0.1 54 0. 327 0.256 4.231 0. 641 1.00 0 3.000
Neth erla nds 6. 060 5.923 2.887 0.283 0.000 0.0 00 0.306 0.5 01 0.6 76 0. 599 0.667 3.674 0. 222 1.00 0 6.000
New Zeal and 5. 462 5.419 2.320 0.177 0.000 0.0 00 0.364 0.3 11 0.3 36 0. 319 0.267 3.886 0. 111 1.00 0 6.000
Norway 5. 444 5.345 2.468 0.306 0.000 0.0 00 0.302 0.3 22 0.2 31 0. 508 0.349 2.895 0. 116 1.00 0 6.000
Other co untr ies 6. 551 6.310 3.623 0.145 0.000 0.0 00 0.230 0.0 87 -0.0 17 0.175 0.167 3.875 0. 167 0.46 2 4.211
Phil ippi nes 6. 209 6.408 3.825 0.367 0.000 0.0 00 0.276 0.0 00 0.0 00 0. 000 0.000 4.643 0. 214 1.00 0 3.000
Pola nd 5. 596 5.859 3.050 0.132 0.000 0.0 00 0.339 0.0 00 0.0 00 0. 189 0.143 5.214 0. 429 1. 000
Sing apore 4. 654 4.846 1.420 0.172 0.009 0.0 10 0.241 0.3 26 0.4 17 0. 444 0.788 4.681 0. 058 1.00 0 7.000
South Af rica 6. 289 6.302 3.318 0.165 0.017 0.0 04 0.291 0.2 45 0.2 04 0. 314 0.603 4.190 0. 414 1. 000
Spain 7. 427 7.163 4.424 0.057 0.000 0.0 00 0.245 0.0 00 0.0 00 0. 292 0.379 4.172 0. 138 1.00 0 5.000
Swed en 5.383 5.154 1. 944 0.331 0.000 0.0 00 0.311 0.7 05 0. 606 0.420 3.154 0. 105 1.00 0 7.000
Swit zerl and 6. 219 6.057 3.013 0.271 0.032 0.0 43 0.256 0.3 38 0.5 73 0. 577 0.798 4.702 0. 105 1.00 0 5.000
Thai land 5. 638 5.731 1.703 0.159 0.000 0.0 00 0.226 0.0 05 0.0 04 0. 110 0.192 3.000 0. 115 1.00 0 5.000
Unit ed Kingd om 5. 333 5.133 1.929 0.476 0.033 0.0 34 0.314 0.1 57 0.2 78 0. 319 0.590 3.034 0. 138 1.00 0 8.000
Unit ed States 6. 821 6.479 3.364 0.336 0.035 0.0 55 0.370 0.0 89 0.1 20 0. 203 0.530 2.821 0. 000 1.00 0 8.000

US & Can ada 6.524 6.213 3. 177 0.333 0.037 0.0 59 0.367 0.1 03 0.1 19 0. 238 0.506 2.813 0. 000 1.00 0 8.000
Euro pe 5. 569 5.438 2.368 0.373 0.023 0.0 53 0.321 0.2 05 0.2 99 0. 444 0.562 3.573 0. 133 0.99 9 6.495
Asia & Pacif ic 5. 634 5.712 2.243 0.232 0.009 0.0 12 0.302 0.1 98 0.1 97 0. 312 0.485 4.608 0. 157 0.99 5 5.750
Afri ca/M iddle East 5.916 5.523 2.745 0.280 0.008 0.0 03 0.287 0.2 21 0.1 54 0. 478 0.438 3.590 0. 227 1. 000
Latin Amer./ Carib. 7.183 7.235 4. 295 0.186 0.043 0.0 87 0.276 0.1 23 0.0 96 0. 275 0.161 4.230 0. 591 0.64 0 3.402

OECD 6. 152 5.945 2.868 0.332 0.028 0.0 53 0.354 0.1 39 0.1 73 0. 316 0.519 3.324 0. 084 1.00 0 7.147
Non-OECD 5. 063 5.230 1.707 0.245 0.009 0.0 05 0.209 0.2 05 0.1 92 0. 372 0.494 4.641 0. 152 0.96 4 5.299
Unit ed States 6. 821 6.479 3.364 0.336 0.035 0.0 55 0.370 0.0 89 0.1 20 0. 203 0.530 2.821 0. 000 1.00 0 8.000
Non-US 5. 601 5.536 2.368 0.306 0.021 0.0 37 0.315 0.1 99 0.2 28 0. 395 0.508 3.848 0. 136 0.99 1 6.166

All firms 5. 979 5.829 2.683 0.318 0.025 0.0 45 0.335 0.1 48 0.1 75 0. 324 0.515 3.532 0. 095 0.99 4 6.835

55
 Table A-3: Pearson Correlation Coefficients
The table shows Pearson correlation coefficients (in percent) between variables that measure incentives to hedge and foreign exchange rate exposure; a (b, c) indicates signifi-
cance at the 1% (5%, 10%) significance level.

Panel A: U.S. firms

Mult. Earn. Cash Cover Tax Tax FX
Share St ock Market Acqu. yield Debt Flow age Lev er Curre Div. Conv. Pr ef. Margi ROA Tang. Log Cred. Rate Expos
Varia ble Class Opt ion \Book As set 3y Ma t. 3y 3y age Quick nt Yield Debt St ock n 3y 3y Asset Size Dummy 3y ure
ƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒ ƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒ
Stock _Opti ons -0.5
R_D_t o_Sal es -4.0 2.3
R_D_t o_Size -3.4 1.6
PPE_t o_Sal es -0.2 -8.5 a
PPE_t o_Size 1.3 -7.3 a
CapEx 3.2 -4.1 c
Marke t_to_ Book -5.3 b 2.2
LogMa rket_ to_Sa les -5.7 a -4.4 b 45.6 a
Acqu_ Assets 2.9 1.3 -9.8 a
Earni ngsyi eld_3y 0.5 6.7 a 18.0 a 2.6
Debt_ Matur ity 4.4 c -1.9 0.9 6.7 a 8.8 a Cash_ Flow_3y
3.6 c 3.1 8.1 a 6.2 a 52.0 a 6.3 a
Cover age_3y 7.5 a 2.2 6.7 a 7.6 a 42.4 a 8.8 a 51.9 a
FC_Ch arge_ 3y 6.8 a 2.9 6.2 a 7.2 a 41.6 a 8.1 a 52.4 a 97.4 a
Lever age 9.8 a -4.8 b -29.8 a 13.5 a -26.1 a 20 .1 a 2.0 1.0
Quick _Ratio -4.7 b 0.1 5.6 a -1 1.8 a -8.1 a 0.2 -3 0.6 a -29.8 a -24 .0 a
Curre nt_Ra tio -3.9 c 1.1 3.0 -1 1.5 a -3.0 3.3 -2 6.3 a -25.3 a -24 .2 a 95.5 a
DivYi eld 1.9 -1 0.2 a -3.7 c 1.2 14.3 a 0.6 7.2 a 11.0 a 8.8 a -9.4 a -11.5 a DivPa yout_ 3y
-1.0 -2.4 12.0 a -3.6 17.5 a -3 .0 13.2 a 22.6 a -8 .7 a -11.8 a -13.1 a 84.0 a
Divid end 3.4 -8.3 a 5.6 a 4.2 b 20.1 a 1.8 16.0 a 28.6 a 0.3 -19.8 a -18.3 a 51.8 a
ConvD ebt 0.4 1.2 -2.8 3.2 1.5 21 .8 a -0.8 2.1 12 .3 a 3.5 2.4 -5.5 b
PrefS tock 3.5 -1.6 -1.7 -0.6 -13.1 a 0.8 -6.5 a -7.0 a 10 .7 a -3.7 c -5.0 b -1.6 -1.1
Gross Profi tMarg in_3y -0.3 7.0 a 6.7 a 1.7 37.6 a -3 .5 59.2 a 29.3 a -7 .5 a -13.5 a -11.3 a 3.1 -2.3 -5.8 a
Logsa les 6.2 a 5.0 b 2.5 9.6 a 20.0 a 14 .7 a 44.9 a 41.5 a 17 .8 a -43.7 a -42.7 a 16.2 a 5.1 b 2.7 19.5 a
ROA_3y 5.2 b 3.1 9.1 a 5.7 a 65.3 a 7.6 a 76.0 a 55.5 a -1 .7 -21.1 a -16.8 a 9.4 a -0.9 -8.5 a 52.3 a
Tangi ble_A ssets -5.3 b -4.8 b 9.8 a -2 6.2 a 4.1 c -15 .1 a -8.0 a -5.5 b -19 .0 a 18.4 a 19.7 a 6.0 b -4.1 c -6.8 a -1.3 2.4
Logsi ze 4.5 b 3.7 c 29.1 a 3.0 23.5 a 20 .1 a 25.1 a 25.4 a -3 .0 -10.1 a -13.6 a 10.5 a 8.7 a 2.6 7.9 a 23 .4 a -12.1 a
Logas sets 7.7 a 3.6 c 4.4 b 9.7 a 13.0 a 19 .8 a 26.5 a 29.1 a 19 .2 a -21.3 a -24.2 a 15.8 a 10.5 a 5.7 a 6.9 a 23 .5
a -16.7 a 88.5 a Logca pex 6.6 a 3.2 8.7 a 3.3 13.8 a 17 .6 a 27.5 a 32.0 a 10 .5 a -25.7 a -28.4 a 14.0 a 7.8 a 2.7 11.4 a 24 .5
a -5.6 b 79.7 a SGA_E xpense -2.8 -1.2 9.0 a -5.6 b -28.0 a -7 .4 a -6 1.6 a -33.3 a -10 .1 a 32.0 a 29.0 a -4.9 b -1.5 2.3 -26.3 a -50 .1 a
5.6 b -18.5 a D_Inc ome_T ax_Cr edit -4.4 b -1 1.0 a 0.0 -0.2 3.0 -3 .9 c 0.5 2.2 4.2 b -5.3 b -6.3 a 14.2 a
0.7 -0.6 -1.4 2.5 5.1 b -0.1
Incom e_Tax _Cred it -0.7 0.2 -0.6 5.2 b 0.6 -2 .6 -0.0 0.4 2.6 -2.6 -2.9 5.3 b -0.9 1.8 0.3 0.9 3.1 3.8 c 59.0 a
Tax_R ate_3y 2.6 4.8 -13.4 a 4.2 -3.2 1.6 -1 4.6 a -10.2 a 8.5 a 1.1 1.5 -9.9 a 2.4 -5.2 c -10.3 a -14 .3 a -18.7 a -1.1 3.5
Forei gn_As sets 1.1 4.2 c -0.2 6.6 a 5.2 b 4.7 c 14.6 a 14.0 a 6.7 a -18.1 a -19.3 a 4.9 b 6.8 a -2.7 8.6 a 13 .1 a -3.6 17.1 a -3.2 -2.5
Forei gn_In come_ 3y 1.3 -1.9 4.4 2.9 8.4 a -0 .3 19.1 a 20.1 a 3.5 -17.1 a -16.9 a 9.3 a -2.4 -3.0 14.4 a 19 .4 a 2.5 21.8 a -1.7 -10.4 b
Forei gn_Sa les 1.9 1.7 3.8 0.2 1.8 -1 .5 16.4 a 8.7 a 3.7 -11.5 a -13.4 a 2.5 10.6 a -0.9 14.1 a 10 .6 a 3.1 21.3 a -1.8 -5.4
FX_Ex posure 1.2 5.5 a 2.4 4.7 b 11.4 a 3.8 c 26.2 a 16.8 a 1.9 -13.7 a -13.7 a 4.7 b 7.6 a -1.7 22.5 a 20 .6 a -5.8 b 26.8 a -9.4 a -0.6
NumIn dSeg 4.0 c 0.2 5.2 b 6.4 a 9.2 a 1.6 9.6 a 18.4 a 1.3 -13.5 a -14.2 a 14.7 a -4.4 b 0.2 3.7 c 10 .3 a -4.9 b 21.3 a 4.2 b 8.5 a 13.2 a
MultI ndSeg 2.1 0.2 4.4 b 2.7 6.7 a 2.5 6.8 a 6.6 a -0 .1 -6.7 a -6.2 a 10.5 a -1.2 0.6 3.8 c 6.8 a -0.7 9.1 a 2.0 2.3 10.1 a
(continued)

56
 Table A-3: Pearson Correlation Coefficients (continued)

Panel B: Non-U.S. firms

Mult. Earn. Cash Cover Tax Tax FX

Share St ock Market Acqu. yield Debt Flow age Lev er Curre Div. Conv. Pr ef. Margi ROA Tang. Log Cred. Rate Ex pos Forgn
Varia ble Class Opt ion \Book As set 3y Ma t. 3y 3y age Quick nt Yield Debt St ock n 3y 3y Asset Size Dummy 3y ure List.
ƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒ ƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒ ƒƒƒƒƒƒƒ ƒƒƒƒƒƒ
Stock _Opti ons -15.0 a
R_D_t o_Sal es -5.3 b -1.3
R_D_t o_Size 1.1 -2.6
PPE_t o_Sal es -0.8 -2.3
PPE_t o_Size 5.7 a -9.7 a
CapEx -4.1 a 0.7
Marke t_to_ Book -2.1 3.1 b
LogMa rket_ to_Sa les -6.5 a 5.1 a 38.1 a
Acqu_ Assets 1.5 3.0 c -9.9 a
Earni ngsyi eld_3y 10.0 a -1.0 12.8 a 3.7 b
Debt_ Matur ity 2.8 c 0.6 0.2 4.5 a 10.8 a Cash_ Flow_3y
7.6 a -1.3 3.4 b 7.2 a 57.0 a 9.8 a
Cover age_3y 7.5 a -1.7 7.9 a 6.7 a 55.7 a 7.2 a 64.8 a
FC_Ch arge_ 3y 7.5 a -1.9 7.9 a 7.0 a 55.8 a 6.9 a 65.0 a 99.5 a
Lever age 3.6 b -1.4 -28.8 a 10.6 a -21.4 a 9.6 a 7.5 a -5.2 a
Quick _Ratio -5.3 a -1.2 2.7 c -1 1.8 a -10.8 a 6.0 a -3 2.7 a -28.3 a -32 .7
a
Curre nt_Ra tio -5.2 a -1.6 1.6 -1 1.8 a -8.3 a 8.4 a -2 9.5 a -25.0 a -33 .9 a 96.7 a
DivYi eld 7.2 a -5.0 a -13.8 a 5.1 a 33.8 a 3.3 b 25.2 a 30.1 a 1.4 -9.9 a -8.6 a
DivPa yout_ 3y 10.7 a -1.3 -0.3 4.2 c 37.0 a 6.9 a 27.5 a 37.7 a -6 .3 a -13.3 a -12.5 a 67.5
a Divid end 11.8 a -1 4.8 a 3.0 b 5.5 a 40.5 a 7.5 a 36.3 a 43.5 a -12 .0 a -11.2 a -10.1 a 55.8
a ConvD ebt 1.4 1.3 -4.8 a -1.4 -2.0 16 .5 a 1.5 -3.4 b 16 .6 a -3.6 b -3.9 b -4.4
a
PrefS tock 1.2 2.2 -3.7 b 0.6 -2.3 2.1 0.6 -0.6 6.5 a -4.8 a -4.7 a 3.3 b 2.8 c
Gross Profi tMarg in_3y 13.1 a 2.2 7.2 a 3.9 b 47.8 a 9.7 a 62.0 a 47.1 a 0.7 -18.8 a -16.5 a 19.0 a 2.2 0.2
Logsa les 14.1 a 3.6 b -0.5 12.1 a 29.5 a 14 .9 a 43.6 a 39.4 a 20 .5 a -37.0 a -35.9 a 24.9 a 5.1 a 5.3 a 40.6 a
ROA_3y 9.7 a -1.4 4.3 a 4.3 a 69.9 a 10 .2 a 74.9 a 64.5 a 6.5 a -24.5 a -21.1 a 24.9 a 1.6 2.0 58.1 a
Tangi ble_A ssets 0.7 -5.2 a 0.7 -2 5.6 a 0.0 -6 .8 a -5.6 a 0.2 -3 .0 b 14.9 a 16.9 a 8.5 a -2.8 c 2.7 c -2.2 -0 .5
Logsi ze 12.1 a 7.8 a 20.8 a 7.6 a 29.0 a 20 .3 a 32.3 a 29.5 a 5.7 a -14.4 a -15.3 a 10.9 a 5.7 a 2.6 c 43.6 a 31 .3 a -13.4 a
Logas sets 14.0 a 4.8 a -5.7 a 13.8 a 25.5 a 20 .5 a 36.8 a 30.6 a 23 .8 a -24.5 a -24.8 a 18.3 a 9.1 a 5.0 a 43.8 a 35 .4 a -12.8 a 90.0
a Logca pex 12.3 a 4.2 a -0.6 6.5 a 24.8 a 21 .4 a 34.2 a 31.1 a 16 .2 a -25.8 a -26.8 a 18.4 a 7.2 a 4.0 a 39.6 a 30 .6 a -5.4 a 79.0
a SGA_Expense -1.7 -0.9 6.7 a -5.8 a -21.9 a -5 .3 a -5 1.2 a -36.0 a -11 .1 a 31.4 a 29.4 a -17.8 a -1.1 -3.6 b -19.9 a -35 .5 a 1.2 -16.0 a
D_Inc ome_T ax_Cr edit 4.7 a 3.2 b 0.3 0.1 2.3 0.8 1.9 -1.5 -0 .1 0.6 0.4 2.2 0.0 1.3 2.9 b 1.5 -1.5 3.7 a
Incom e_Tax _Cred it 1.8 1.5 -2.7 3.1 -2.1 -0 .6 -3.3 c -4.4 b -0 .4 0.5 0.1 3.0 -1.6 1.6 -1.9 -4 .4 b -1.7 2.4 60.9 a
Tax_R ate_3y -1.0 1.7 1.5 2.5 -1.7 2.2 -2.0 1.4 7.3 a -12.3 a -12.1 a -0.8 -5.2 b 5.5 b -0.4 -0 .8 -13.7 a 1.1 1.2
Forei gn_As sets 4.5 b 5.4 b -3.7 7.3 a 2.9 5.8 b 14.4 a 6.5 a 16 .6 a -15.0 a -14.7 a -4.8 b 8.2 a 1.4 11.2 a 9.2 a -15.0 a 24.9 a -0.7 1.4
Forei gn_In come_ 3y 3.2 2.3 -5.0 4.1 0.7 2.3 8.6 a 8.2 a 9.7 a -2.8 -4.6 -1.8 3.2 3.6 5.7 c 1.8 -11.3 a 20.2 a 3.8 7.3 c
Forei gn_Sa les 3.4 c 6.5 a 3.2 c 2.9 -0.9 2.4 3.4 c -0.9 7.7 a -1.1 -0.7 -7.3 a 6.4 a 2.7 7.7 a -0 .2 -10.7 a 20.7 a 3.0 c 1.4
FX_Ex posure 2.1 9.9 a 2.8 b 5.4 a 16.3 a 3.3 b 20.7 a 17.0 a 6.3 a -11.3 a -10.5 a 4.4 a 3.1 b 2.8 c 33.3 a 19 .2 a -9.2 a 29.1 a 2.5 c 3.3
NumIn dSeg 8.5 a -1 2.4 a -4.7 a 7.2 a 12.0 a 4.9 a 11.3 a 10.9 a 13 .2 a -12.3 a -12.9 a 12.1 a 5.3 a 4.8 a 18.5 a 15 .0 a -2.8 c 28.4 a -0.7 2.3 19.0 a
MultI ndSeg 4.9 a -6.3 a -0.6 5.1 a 6.1 a 0.0 7.8 a 9.6 a 4.1 a -9.6 a -9.9 a 6.8 a 0.1 4.5 a 11.9 a 8.4 a -2.8 c 12.2 a -0.9 2.0 8.0 a
Forei gn_Li sting 4.0 a 1.7 2.8 b -0.1 9.2 a 7.0 a 10.9 a 5.6 a 2.0 -2.1 -2.0 0.9 5.0 a 0.2 15.9 a 10 .9 a -1.3 33.9 a 1.1 -2.8 11.8 a
ADR 4.2 a 2.8 c 3.4 b -0.1 9.3 a 6.9 a 11.3 a 6.1 a 1.4 -2.2 -2.2 1.0 5.5 a 0.1 16.0 a 11 .2 a -1.8 33.2 a 1.3 -2.1 13.4 a 94.8 a
GDR 0.4 -4.9 a -1.3 1.0 0.8 -0 .3 -0.3 -0.4 2.0 -0.4 -0.1 0.7 0.3 1.2 0.3 -0 .0 1.4 3.6 b 0.0 -3.5 -5.9 a 24.6 a
NYS -0.8 3.0 b -0.4 -1.5 0.5 3.0 b 0.8 -0.5 0.1 1.0 1.2 -1.7 -2.3 -1.3 2.9 b 0.6 0.4 6.2 a -0.7 2.3 4.2 a 12.8
a
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