Firms use financial derivative instruments to manage risks. Smoothing cash flows and earnings are an important aspect of financial risk management. This study investigates the use of financial derivatives in the lodging, hotel real-estate investment trusts (REITs) and casino industries. The data for the study were collected from both the Compustat database and firms' Form 10-K filings with the Securities and Exchange Commission (SEC). The findings verify that there are significant differences between financial derivatives users and non-users in terms of financial characteristics, cash flow volatility and earnings volatility.
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