Multinational corporations and hedging exchange rate exposure |
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Institution: | 1. Deakin Business School, Deakin University, 221 Burwood Highway, Burwood, VIC 3125, Australia;2. Faculty of Business and Economics, University of Melbourne, 198 Berkeley Street, Carlton, VIC 3010, Australia |
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Abstract: | Empirical research measuring multinational corporations' exchange rate exposure is inconclusive. Findings of no significant exposure in some samples and significant exposure in others may be due to offsetting effects for multinational corporations, financial hedging strategies, or simply noisy data. Significant exposure has been found in certain industries and for some smaller firms. This study measures the net exposure to exchange rate changes for a broad cross section of large, US multinational corporations. Using data on financial hedging activity for 276 US multinational corporations, this paper provides evidence that previous findings of no significant exchange rate exposure for this cross section of the economy are likely due in part to the financial hedging activities of these firms. |
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