The use of derivative financial instruments to manage corporate risks.

Summary This thesis studies the determinants of risk management and its effect on firm value in France. Results from Probit and Tobit models indicate that risk hedging is positively related to size and leverage and negatively related to liquidity. We also examine the interaction between hedging and financing decisions using a simultaneous equation model. The results indicate that hedging and financing decisions are jointly determined. We find that more leveraged firms have a greater incentive to hedge and that hedging increases firms' debt capacity. We also study the relationship between corporate governance and risk hedging. We find that risk hedging is negatively related to outside blockholders and positively related to stock options. However, there is no evidence linking managerial ownership, independent directors and board size to risk hedging. Finally, we examine the relationship between the use of derivatives and firm value. The results indicate that risk hedging does not appear to affect firm value.