Finansal risk yönetimi ve firma performansı: Avrupa sınır ötesi birleşme ve satın almalarından bulgular

Due to the increasing volatility in financial markets, the use of financial derivative instruments (forward, futures, option, and swap) has become widespread particularly between large firms around the world. Market risk can be grouped into three categories: exchange rate risk, interest rate risk and commodity price risk. By using financial derivatives, companies can manage these risks. It is required by International Financial Reporting Standards (IFRS) to disclose their financial positions on financial instruments in their financial reports. The related details in financial reports regarding financial derivatives make it possible to do empirical research on the impact of derivative use on firm value. Along with the mixed results on the relationship between hedging and firm value, empirical research that question the impact of hedging on firm operating activities have been unexpectedly missing. In this study, we aim to examine a significant type of firm operations, cross-border mergers and acquisitions, which is well known for changing a firm's financial risk exposure. By studying the effect of hedging on firm performance through cross-border M&As, we aim to find out whether and in what way risk management affects firm performance. With a sample of 537 cross-border mergers and acquisitions (M&As) conducted by 14 different developed European companies between 2007 and 2019, we find evidence that acquirers with financial hedging programs have higher cumulative abnormal returns (CARs) than those without such programs around deal announcements. Additionally, our results show that derivatives users experience longer deal completion times than non-users. Overall, this study provides findings for the European region on the connection between corporate financial hedging and firm performance. Our findings regarding Europe support the previous study in the USA.