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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.
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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:84878264445
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
2015-04-24 14:54:26
date last changed
2017-01-01 03:23:15
@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},
  keyword      = {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},
  volume       = {21},
  year         = {2015},
}