The Effects of Currency Hedging on Firm Value using a Threshold model

Yidi Sun; Bruce Morley; Paolo Zeppini

doi:10.1016/j.iref.2026.105323

The Effects of Currency Hedging on Firm Value using a Threshold model

Yidi Sun, Bruce Morley, Paolo Zeppini

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Abstract

This study has examined the effects of currency derivatives on firm value in China and explored the dynamics of firm performance whilst considering agency problems and information asymmetry. The sample comprises data from 316 listed firms in the manufacturing industry on the Shenzhen stock market and uses Tobin’s Q as the measure of the firm’s value. Currency derivatives usage does not show any effect in the static threshold model, while it exhibits a significant valuation effect with the estimation of the dynamic threshold model: in the lower regime (low leverage firms) the effect of currency derivatives is significant and positive, there is less of an effect in the higher regime (high leverage firms).

Original language	English
Article number	105323
Pages (from-to)	1
Number of pages	15
Journal	International Review of Economics and Finance
Volume	108
Early online date	22 Apr 2026
DOIs	https://doi.org/10.1016/j.iref.2026.105323
Publication status	E-pub ahead of print - 22 Apr 2026

Data Availability Statement

Data will be made available on request.

Funding

This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.

Keywords

Foreign currency derivative, Threshold, Tobin’s Q; Exports; China.

ASJC Scopus subject areas

Economics, Econometrics and Finance(all)

Access to Document

10.1016/j.iref.2026.105323Licence: CC BY

The Effects of Currency Hedging on Firm Value using a Threshold modelAccepted author manuscript, 111 KBLicence: CC BY

Cite this

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abstract = "This study has examined the effects of currency derivatives on firm value in China and explored the dynamics of firm performance whilst considering agency problems and information asymmetry. The sample comprises data from 316 listed firms in the manufacturing industry on the Shenzhen stock market and uses Tobin{\textquoteright}s Q as the measure of the firm{\textquoteright}s value. Currency derivatives usage does not show any effect in the static threshold model, while it exhibits a significant valuation effect with the estimation of the dynamic threshold model: in the lower regime (low leverage firms) the effect of currency derivatives is significant and positive, there is less of an effect in the higher regime (high leverage firms). ",

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N2 - This study has examined the effects of currency derivatives on firm value in China and explored the dynamics of firm performance whilst considering agency problems and information asymmetry. The sample comprises data from 316 listed firms in the manufacturing industry on the Shenzhen stock market and uses Tobin’s Q as the measure of the firm’s value. Currency derivatives usage does not show any effect in the static threshold model, while it exhibits a significant valuation effect with the estimation of the dynamic threshold model: in the lower regime (low leverage firms) the effect of currency derivatives is significant and positive, there is less of an effect in the higher regime (high leverage firms).

AB - This study has examined the effects of currency derivatives on firm value in China and explored the dynamics of firm performance whilst considering agency problems and information asymmetry. The sample comprises data from 316 listed firms in the manufacturing industry on the Shenzhen stock market and uses Tobin’s Q as the measure of the firm’s value. Currency derivatives usage does not show any effect in the static threshold model, while it exhibits a significant valuation effect with the estimation of the dynamic threshold model: in the lower regime (low leverage firms) the effect of currency derivatives is significant and positive, there is less of an effect in the higher regime (high leverage firms).

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The Effects of Currency Hedging on Firm Value using a Threshold model

Abstract

Data Availability Statement

Funding

Keywords

ASJC Scopus subject areas

Access to Document

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Cite this