How do firms manage their foreign exchange exposure?

Hecht, Andreas; Lampenius, Niklas

doi:10.3390/jrfm16080359

Please use this identifier to cite or link to this item: https://doi.org/10.21256/zhaw-29702

Publication type:	Article in scientific journal
Type of review:	Peer review (publication)
Title:	How do firms manage their foreign exchange exposure?
Authors:	Hecht, Andreas Lampenius, Niklas
et. al:	No
DOI:	10.3390/jrfm16080359 10.21256/zhaw-29702
Published in:	Journal of Risk and Financial Management
Volume(Issue):	16
Issue:	8
Page(s):	359
Issue Date:	1-Aug-2023
Publisher / Ed. Institution:	MDPI
ISSN:	1911-8066 1911-8074
Language:	English
Subjects:	Foreign exchange; Corporate risk management; Selective hedging; Speculation
Subject (DDC):	658.1: Organization and finance
Abstract:	We examine how firms manage their foreign exchange (FX) exposure using publicly reported data on FX exposure before and after hedging with corresponding hedging instruments. Based on calculated firm-, year-, and currency-specific hedge ratios, we find that about 80 (20) percent of FX firm exposure is managed using risk-decreasing (risk-increasing/risk-constant) strategies. Further, we find that prior hedging outcomes affect the management of current FX exposure, where the exposure is reduced and management adjusts the hedge ratio closer to its benchmark average hedge ratio following prior benchmark losses. When separately evaluating risk-decreasing and risk-increasing positions, we find that prior benchmark losses are only relevant for risk-increasing but not for risk-decreasing positions, i.e., hedging decisions are independent of prior benchmark losses if the intention is to reduce FX exposure.
URI:	https://digitalcollection.zhaw.ch/handle/11475/29702
Fulltext version:	Published version
License (according to publishing contract):	CC BY 4.0: Attribution 4.0 International
Departement:	School of Management and Law
Organisational Unit:	Institute for Financial Management (IFI)
Appears in collections:	Publikationen School of Management and Law

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Hecht, A., & Lampenius, N. (2023). How do firms manage their foreign exchange exposure? Journal of Risk and Financial Management, 16(8), 359. https://doi.org/10.3390/jrfm16080359

Hecht, A. and Lampenius, N. (2023) ‘How do firms manage their foreign exchange exposure?’, Journal of Risk and Financial Management, 16(8), p. 359. Available at: https://doi.org/10.3390/jrfm16080359.

A. Hecht and N. Lampenius, “How do firms manage their foreign exchange exposure?,” Journal of Risk and Financial Management, vol. 16, no. 8, p. 359, Aug. 2023, doi: 10.3390/jrfm16080359.

HECHT, Andreas und Niklas LAMPENIUS, 2023. How do firms manage their foreign exchange exposure? Journal of Risk and Financial Management. 1 August 2023. Bd. 16, Nr. 8, S. 359. DOI 10.3390/jrfm16080359

Hecht, Andreas, and Niklas Lampenius. 2023. “How Do Firms Manage Their Foreign Exchange Exposure?” Journal of Risk and Financial Management 16 (8): 359. https://doi.org/10.3390/jrfm16080359.

Hecht, Andreas, and Niklas Lampenius. “How Do Firms Manage Their Foreign Exchange Exposure?” Journal of Risk and Financial Management, vol. 16, no. 8, Aug. 2023, p. 359, https://doi.org/10.3390/jrfm16080359.