Integrated Foreign Exchange Risk Management: The Role of Import in Medium-Sized, Manufacturing Firms

45 Pages Posted: 20 Nov 2008 Last revised: 2 Dec 2009

See all articles by Tom Aabo

Tom Aabo

Aarhus University

Esben Høg

Aalborg University - Department of Mathematical Sciences

Jochen Kuhn

A.P.Moller-Maersk

Date Written: November 18, 2008

Abstract

Empirical research has focused on export as a proxy for the exchange rate exposure and the use of foreign exchange derivatives as the instrument to deal with this exposure. This empirical study applies an integrated foreign exchange risk management approach with a particular focus on the role of import in medium-sized, manufacturing firms in Denmark (a small, open economy). We find a strong, negative relation between import and foreign exchange derivatives usage on the aggregate level. Our findings are consistent with the notion that firms use import to match the foreign exchange exposure created by foreign sales activities.

Keywords: Integrated Foreign Exchange Risk Management, Import, Medium-Sized Firms

JEL Classification: F23, G32

Suggested Citation

Aabo, Tom and Høg, Esben and Kuhn, Jochen, Integrated Foreign Exchange Risk Management: The Role of Import in Medium-Sized, Manufacturing Firms (November 18, 2008). Available at SSRN: https://ssrn.com/abstract=1303359 or http://dx.doi.org/10.2139/ssrn.1303359

Tom Aabo (Contact Author)

Aarhus University ( email )

Fuglesangs Alle 4
DK-8210 Aarhus
Denmark
+45 87 16 48 39 (Phone)
+45 86 15 01 88 (Fax)

Esben Høg

Aalborg University - Department of Mathematical Sciences ( email )

Fredrik Bajers Vej 7E
Aalborg
Denmark

Jochen Kuhn

A.P.Moller-Maersk ( email )

Esplanaden 50
Copenhagen K, 1098
Denmark
+45 3363 3628 (Phone)

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