Does Centralisation of FX Derivative Usage Impact Firm Value?

Håkan Jankensgård

Research output: Contribution to journalArticlepeer-review

7 Citations (SciVal)

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.
Original languageEnglish
Pages (from-to)309-332
JournalEuropean Financial Management
Volume21
Issue number2
Early online date2013
DOIs
Publication statusPublished - 2015

Subject classification (UKÄ)

  • Business Administration

Keywords

  • centralisation
  • risk management
  • currency risk
  • derivative
  • hedging

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