Effect of corporate hedging on financial ratios: evidence from Russian companies

Abstract

The main goal of this research was to identify the effect of the use of corporate hedging by Russian companies on their financial ratios. The annual reports of 150 Russian companies for the period from 2007 to 2012 were analyzed. Companies were divided into 2 groups: hedging and non-hedging. For the analysis of the difference in financial ratios Student’s t-test was used. Also the case study of one Russian company is analyzed. The use of particular hedging instruments was modeled and the impact is shown on the financial ratios. The conclusion of the research is that Oil & Gas companies that use hedging have in general higher profitability and business activity ratios, while investment criteria and liquidity ratios are in general lower among hedging companies.