When Actions Speak Louder than Words: Currency Management in Non-Financial Corporations

56 Pages Posted: 30 Aug 2014

See all articles by Sungjae F. Kim

Sungjae F. Kim

Furman University

Don M. Chance

Louisiana State University, Baton Rouge - Department of Finance; Louisiana State University, Baton Rouge - E.J. Ourso College of Business Administration

Date Written: August 29, 2014

Abstract

Using a unique data set with complete firm-level components of currency positions, we examine whether large multinational non-financial firms are speculating or hedging as they manage their currency spot and derivatives positions. We find a notable discord between the stated policies of companies and their actions. We also find that the transactions they undertake are associated with market shock variables. Overall, the evidence strongly suggests that these non-financial firms are speculating instead of hedging when they manage their currency spot and derivatives positions. Moreover, we find that even when they are hedging, they are still attempting to time the market.

Keywords: currency risk management, derivatives, hedging

JEL Classification: F30, F31, G15

Suggested Citation

Kim, Sungjae Francis and Chance, Don M., When Actions Speak Louder than Words: Currency Management in Non-Financial Corporations (August 29, 2014). Available at SSRN: https://ssrn.com/abstract=2489156 or http://dx.doi.org/10.2139/ssrn.2489156

Sungjae Francis Kim

Furman University ( email )

Greenville, SC 29613
United States
8642943307 (Phone)

Don M. Chance (Contact Author)

Louisiana State University, Baton Rouge - Department of Finance ( email )

2900 BEC
Baton Rouge, LA 70803
United States

Louisiana State University, Baton Rouge - E.J. Ourso College of Business Administration ( email )

Baton Rouge, LA 70803-6308
United States
225-578-0372 (Phone)
225-578-6366 (Fax)

HOME PAGE: http://www.bus.lsu.edu/academics/finance/faculty/dchance/

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