Why hedge currency exposure with foreign currency debt?
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| Format: | Artículo científico |
| Language: | en |
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Consejo Latinoamericano de Escuelas de Administración
2013
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| author | Milagros Vivel-Búa |
| author_facet | Milagros Vivel-Búa |
| contents | Why hedge currency exposure with foreign currency debt? Milagros Vivel-Búa Luis Otero-González Sara Fernández-López Pablo Durán-Santomil Administración y Contabilidad Debts Hedging Derivatives Currency exposure Probit panel data Purpose – Using hedging theories, we analyse the variables that determine the decision to hedge with foreign currency debt. Design/methodology/approach – Using a sample of 100 Spanish companies with a significant social and economic role in Latin American during 2004-2007, we estimated probit models for panel data. Findings – Our results showed that the main determinants are scale economies and the use of derivatives. On the one hand, we found that this hedging is positively related to tax loss carry- forwards and long-term economic sectors, and on the other, that it is related negatively to information asymmetries and growth opportunities. Results were mixed for foreign currency exposure. Research limitations/implications – The limitations of this paper are associated to the availability of information from annual reports and the SABI database, especially the variables in relation to operational hedging. Therefore, as a future line of research, we propose gathering of data on these internal hedging practices in order to obtain more accurate evidence about its use in companies and their relationship with financial hedging. Originality/value – This paper makes three major contributions to the existing literature. First, it contributes by illustrating currency hedging practices used by Spanish firms – which are important in Latin markets – to manage exchange rate exposure in. Second, we used more variables for the empirical analyses to contrast the hedging theories than previous studies had. Finally, we used a data panel because it allows the control of unobservable heterogeneity and endogeneity problems. Previous studies only used cross-section estimations. 2013 artículo científico 1012-8255 https://www.redalyc.org/articulo.oa?id=71629938004 en http://www.redalyc.org/revista.oa?id=716 Academia. Revista Latinoamericana de Administración application/pdf Consejo Latinoamericano de Escuelas de Administración Academia. Revista Latinoamericana de Administración (Perú) Num.2 Vol.26 |
| format | Artículo científico |
| id | redalyc_71629938004 |
| institution | Redalyc |
| language | en |
| publishDate | 2013 |
| publisher | Consejo Latinoamericano de Escuelas de Administración |
| spellingShingle | Why hedge currency exposure with foreign currency debt? Milagros Vivel-Búa Administración y Contabilidad Debts Hedging Derivatives Currency exposure Probit panel data Why hedge currency exposure with foreign currency debt? Milagros Vivel-Búa Luis Otero-González Sara Fernández-López Pablo Durán-Santomil Administración y Contabilidad Debts Hedging Derivatives Currency exposure Probit panel data Purpose – Using hedging theories, we analyse the variables that determine the decision to hedge with foreign currency debt. Design/methodology/approach – Using a sample of 100 Spanish companies with a significant social and economic role in Latin American during 2004-2007, we estimated probit models for panel data. Findings – Our results showed that the main determinants are scale economies and the use of derivatives. On the one hand, we found that this hedging is positively related to tax loss carry- forwards and long-term economic sectors, and on the other, that it is related negatively to information asymmetries and growth opportunities. Results were mixed for foreign currency exposure. Research limitations/implications – The limitations of this paper are associated to the availability of information from annual reports and the SABI database, especially the variables in relation to operational hedging. Therefore, as a future line of research, we propose gathering of data on these internal hedging practices in order to obtain more accurate evidence about its use in companies and their relationship with financial hedging. Originality/value – This paper makes three major contributions to the existing literature. First, it contributes by illustrating currency hedging practices used by Spanish firms – which are important in Latin markets – to manage exchange rate exposure in. Second, we used more variables for the empirical analyses to contrast the hedging theories than previous studies had. Finally, we used a data panel because it allows the control of unobservable heterogeneity and endogeneity problems. Previous studies only used cross-section estimations. 2013 artículo científico 1012-8255 https://www.redalyc.org/articulo.oa?id=71629938004 en http://www.redalyc.org/revista.oa?id=716 Academia. Revista Latinoamericana de Administración application/pdf Consejo Latinoamericano de Escuelas de Administración Academia. Revista Latinoamericana de Administración (Perú) Num.2 Vol.26 |
| title | Why hedge currency exposure with foreign currency debt? |
| topic | Administración y Contabilidad Debts Hedging Derivatives Currency exposure Probit panel data |
| url | https://www.redalyc.org/articulo.oa?id=71629938004 |