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Risikokommunikasjon og finansielle derivater : effekt på lønnsomhet og selskapsverdi

Berg, Magnus; Håpnes, Daniel
Master thesis
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URI
http://hdl.handle.net/11250/2453503
Date
2017
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  • Master Thesis [4657]
Abstract
This thesis addresses how firms’ risk communication and derivatives usage affect firm value

and profitability. We have conducted content analyses of 447 annual reports on 66

companies listed on the Oslo Stock Exchange for the years 2006 to 2014. We used risk

communicating words, as a proportion of the annual reports’ total words, and NUES ratings

provided by EY, as variables for risk communication. For derivatives, both a dummy

variable for usage/non-usage, and fair derivative values were investigated. The fair

derivative values were measured as a proportion of the companies' total assets, where we

considered asset derivatives, liability derivatives, and net derivatives.

From the bivariate analyses, we discovered that risk communication had a non-linear

relationship with firm value and profitability. At the same time, we observed that companies'

focus on, and work with, risk communication had increased in the period from 2006 to 2014.

This builds on the findings of Kallenberg (2002), which found that companies' risk and risk

management efforts had increased from 1987 to 2001. In addition, from the initial analysis

of the effect of derivatives usage, we found a negative correlation with firm value, but

positive for profitability.

The results of the multivariate analyses indicated that risk communication did not have any

measurable impact on profitability or firm value. For the derivatives usage, we found that

companies that use derivatives have higher firm value and profitability than non-users. The

use of financial derivatives to reduce risk therefore appears to give a competitive advantage

over those who do not choose to use derivatives. This supports Smith and Stulz (1985) who

argue that financial risk management has an effect on firm value, in addition to several

renown empirical studies.

From fair values, we found that asset derivatives have a negative impact on firm value, but

positive for profitability, given that you control for companies' profitability in measuring

firm value. For profitability, we found that the net value of derivatives had a positive effect,

but did not affect firm value. Liability derivatives are shown with no significant impact on

either firm value or profitability.

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