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2023 | OriginalPaper | Buchkapitel

Foreign Exchange Risk Hedging Policy: Evidence from France

verfasst von : Ghassen Nouajaa, Jean-Laurent Viviani

Erschienen in: Essays on Financial Analytics

Verlag: Springer International Publishing

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Abstract

This paper examines foreign exchange risk hedging determinants for a sample of 82 French non-financial firms. Starting from the observation that firms, often, use both currency derivatives and foreign debt, we find evidence that foreign debt can be considered as hedging tool in addition to currency derivatives. Our results show that currency derivatives’ hedging depends from firm size, financial distress risk, liquidity level, foreign sales and future growth opportunities. Foreign debt level depends from firm size, debt level, foreign sales and its future growth opportunities.
We demonstrate, further, that foreign debt and currency derivatives are quite different hedging tools. Our results show that the level of operational hedging with foreign debt seems to be loosely correlated with that of currency derivatives.

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Nächstes Kapitel Monetary Utility Functions and Risk Functionals
Fußnoten
1
FX is an abbreviation for foreign exchange.
 
2
Aabo (2006) study examines determinants of the relative importance of foreign debt to currency derivatives. Results demonstrate that foreign debt is, often, used as an alternative for currency derivatives’ hedging and most firms tend to prefer foreign debt to derivatives when hedging long-term exposure.
 
3
Fixed charge coverage ratio is as follows: earnings before interest and taxes/((interest expense on debt + preferred dividends)/(1−tax rate)). DataStream data type WC08251.
 
4
The foreign sales ratio, here, is manually computed using data about international sales by different geographical areas in DataStream (not as presented with data type WC08731 in the same database, which includes sales in the eurozone). It is equal to the sum of international sales out of the eurozone divided by the total of net sales for each firm and each year of the study period.
 
5
The euro common currency is, officially, adopted since 1999.
 
6
Myers, S., Majluf, N., 1984. “Corporate financing and investment decisions when firms have information that investors do not have”. Journal of Financial Economics. 13 (2), 187–222
 
7
The tobit model is left censored (censored at zero).
 
8
The tobit model is left censored (censored at zero).
 
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Metadaten
Titel
Foreign Exchange Risk Hedging Policy: Evidence from France
verfasst von
Ghassen Nouajaa
Jean-Laurent Viviani
Copyright-Jahr
2023
Buch
Essays on Financial Analytics

Print ISBN: 978-3-031-29487-7

Electronic ISBN: 978-3-031-29050-3

Copyright-Jahr: 2023

DOI
https://doi.org/10.1007/978-3-031-29050-3_1

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