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The wealth effect of swap usage in the food processing industry
Author(s) -
Yang Jian,
Leatham David J.,
Case Spencer A.
Publication year - 2000
Publication title -
agribusiness
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.57
H-Index - 43
eISSN - 1520-6297
pISSN - 0742-4477
DOI - 10.1002/1520-6297(200022)16:3<367::aid-agr8>3.0.co;2-4
Subject(s) - swap (finance) , interest rate swap , shareholder , monetary economics , business , economics , financial economics , econometrics , finance , corporate governance
U.S. companies use interest rate swaps more than any other financial derivative. The effect of swap usage on the shareholders' wealth is both controversial and unclear. Using a sample from the food processing industry, we examined both short‐run and long‐run wealth effects associated with swap usage. A significant long‐run wealth effect of swap usage on swap users was not found. However, there was a significant negative wealth effect during a short period before firms first disclosed swap usage to the SEC. This finding is consistent with the argument that derivative usage may not be in the best interest of shareholders. © 2000 John Wiley & Sons, Inc.