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Does Centralisation of FX Derivative Usage Impact Firm Value?

Jankensgård, Håkan LU (2015) In European Financial Management 21(2). p.309-332
Abstract
Previous research has shown that firms identified as derivative users tend to be valued at a premium relative to non-users. In this paper I develop the hypothesis that the derivative premium' is higher in firms with centralised FX exposure management, compared to a decentralised approach in which subsidiaries retain bank contacts and/or decision-making authority. This study benefits from unique survey data on the FX management practices and derivative usage of Swedish listed firms. The data supports the centralisation-hypothesis. Firms with a centralised approach have a statistically significant derivative premium of around 15%, whereas there is no premium for decentralised firms.
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
centralisation, risk management, currency risk, derivative, hedging
in
European Financial Management
volume
21
issue
2
pages
309 - 332
publisher
Wiley-Blackwell
external identifiers
  • wos:000351175800005
  • scopus:84924736544
ISSN
1354-7798
DOI
10.1111/j.1468-036X.2013.12014.x
language
English
LU publication?
yes
id
f707ff66-a049-4c15-a831-bf9348d0d44a (old id 5293745)
date added to LUP
2016-04-01 10:13:20
date last changed
2022-03-12 03:23:22
@article{f707ff66-a049-4c15-a831-bf9348d0d44a,
  abstract     = {{Previous research has shown that firms identified as derivative users tend to be valued at a premium relative to non-users. In this paper I develop the hypothesis that the derivative premium' is higher in firms with centralised FX exposure management, compared to a decentralised approach in which subsidiaries retain bank contacts and/or decision-making authority. This study benefits from unique survey data on the FX management practices and derivative usage of Swedish listed firms. The data supports the centralisation-hypothesis. Firms with a centralised approach have a statistically significant derivative premium of around 15%, whereas there is no premium for decentralised firms.}},
  author       = {{Jankensgård, Håkan}},
  issn         = {{1354-7798}},
  keywords     = {{centralisation; risk management; currency risk; derivative; hedging}},
  language     = {{eng}},
  number       = {{2}},
  pages        = {{309--332}},
  publisher    = {{Wiley-Blackwell}},
  series       = {{European Financial Management}},
  title        = {{Does Centralisation of FX Derivative Usage Impact Firm Value?}},
  url          = {{http://dx.doi.org/10.1111/j.1468-036X.2013.12014.x}},
  doi          = {{10.1111/j.1468-036X.2013.12014.x}},
  volume       = {{21}},
  year         = {{2015}},
}