Capital Expenditure, Corporate Hedging and Firms’ Value: Evidence from the Oil and Gas Sector of Pakistan

Abstract

The purpose of this study was to determine the effect of capital expenditure and corporate hedging on the firm’s value. According to theory, hedging can raise business value by lowering costs and volatility, but it can also lower firm value by optimizing manager's utility. The study employed secondary data and population was collected from seventeen oil and gas companies that were listed on the PSX from 2011 to 2022. Panel data have been examined for fixed effect models (categories of panel model). Software called Eviews was used for analysis. On the dataset, the Levin li chu, Hauseman and Durban Watson were run. The results revealed that the Capex, Profitability, Cash holding and interest rate hedge capex have significant but Forex hedge; forex hedge capex, interst rate capex and leverage have insignificant impact with firm’s value. The results of this study suggest that Pakistan's economy urgently needs to review as may protect existing as well as foreign investors.