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    Derivatives usage and firm value by Pande, Arjun

    This thesis analyzes a sample of large non-financial U.S. firms listed on the S&P 500 index to establish a concrete relationship between firm value and derivatives usage. Derivatives are widely utilized by firms to hedge various types of risks, however, the exact effects of derivatives usage and how such activities are perceived by the market are not very clear. An IV regression model is used since the decision to use derivatives is not exogenous. Both notional values and fair values of derivatives are considered in establishing a relationship with firm value. The results suggest that derivatives usage has a negative connotation and the market values user firms at a discount.