Financial Hedging and Firm Performance: Evidence from Cross-border Mergers and Acquisitions


  • The authors would like to thank the two anonymous referees, the journal editor, John Doukas, Eric de Bodt, Chris Brooks, Tao Chen; Zhiyao Chen, Michael Clements, Pasquale Della Corte, Espen Eckbo, Zhan Feng, Ranko Jelic, Wei-Ming Lee, Lalitha Naveen, Annette Poulsen, Karin Thorburn, Baolian Wang, Ke Yang, and seminar participants at the ICMA Centre of Henley Business School, Central Washington University; the Second Young Finance Scholars' Conference at the University of Sussex; the IFABS 2015 Corporate Finance Conference at Oxford University; the 15th Finance, Risk and Accounting Perspectives Conference; the 2015 Financial Management Association Annual Conference; the 2015 Paris Financial Management Conference the Fourth ECCCS Workshop on Governance and Control; and the BAFA Annual Conference 2016 for their insightful and constructive comments. The authors also thank Anh To and Norika Kobayashi for their research assistance. Financial support from the ICMA Centre is gratefully acknowledged.


Using a sample of 1,369 cross-border acquisitions announced by Standard & Poor's 1500 firms between 2000 and 2014, we find strong evidence that derivatives users experience higher announcement returns than non-users, which translates into a US$ 193.7 million shareholder gain for an average-sized acquirer. In addition, we find that acquirers with hedging programmes have higher deal completion probabilities, longer deal completion times, and better long-term post-deal performance. We confirm our findings after employing an extensive array of models to address potential endogeneity. Overall, our results provide new insights into a link between corporate financial hedging and firm performance.