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Cash Flows versus Accounting Earnings in Managing Exchange Rate Exposures: An Empirical Study of Non-Financial Companies

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Cash Flows versus Accounting Earnings in Managing Exchange Rate Exposures: An Empirical Study of Non-Financial Companies. / Aabo, Tom.

2003. Paper presented at FMA European Conference, Dublin, Ireland, .

Research output: Contribution to conferencePaperResearch

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Aabo, T 2003, 'Cash Flows versus Accounting Earnings in Managing Exchange Rate Exposures: An Empirical Study of Non-Financial Companies', Paper presented at FMA European Conference, Dublin, Ireland, 04/06/2003 - 07/06/2003.

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@conference{938922e0c48a11da892f000ea68e967b,
title = "Cash Flows versus Accounting Earnings in Managing Exchange Rate Exposures: An Empirical Study of Non-Financial Companies",
abstract = "Financial theory argues that companies should manage cash flows and not accounting earnings when they hedge exchange rate exposures. Still, empirical evidence shows that a number of companies choose to manage accounting earnings. This empirical study of Danish, non-financial companies finds (1) that when hedging the majority of companies expect to add value to their company by avoiding financial distress (reduce down side risk), (2) that when hedging managing cash flows versus managing accounting earnings as a first priority splits the companies in two, (3) a lack of difference (except for profitability) in company characteristics between the group of companies that manage cash flows versus the group of companies that manage accounting earnings as a first priority. The decision in real business on whether to manage cash flows or accounting earnings when hedging exchange rate exposures seems to be more a function of differences in management attitudes than a function of differences in objective company characteristics.",
keywords = "Heding, Risk Management, Cash Flows, Accounting Earnings, Non-Financial Companies, HH{\AA} forskning, Heding, Risk Management, Cash Flows, Accounting Earnings, Non-Financial Companies, HH{\AA} forskning",
author = "Tom Aabo",
note = "Artiklen haves i ringbind p{\aa} Tidsskriftsl{\ae}sesalen ved HH{\AA} Info Sider: 25 s.; null ; Conference date: 04-06-2003 Through 07-06-2003",
year = "2003",
language = "English",

}

RIS

TY - CONF

T1 - Cash Flows versus Accounting Earnings in Managing Exchange Rate Exposures: An Empirical Study of Non-Financial Companies

AU - Aabo, Tom

N1 - Artiklen haves i ringbind på Tidsskriftslæsesalen ved HHÅ Info Sider: 25 s.

PY - 2003

Y1 - 2003

N2 - Financial theory argues that companies should manage cash flows and not accounting earnings when they hedge exchange rate exposures. Still, empirical evidence shows that a number of companies choose to manage accounting earnings. This empirical study of Danish, non-financial companies finds (1) that when hedging the majority of companies expect to add value to their company by avoiding financial distress (reduce down side risk), (2) that when hedging managing cash flows versus managing accounting earnings as a first priority splits the companies in two, (3) a lack of difference (except for profitability) in company characteristics between the group of companies that manage cash flows versus the group of companies that manage accounting earnings as a first priority. The decision in real business on whether to manage cash flows or accounting earnings when hedging exchange rate exposures seems to be more a function of differences in management attitudes than a function of differences in objective company characteristics.

AB - Financial theory argues that companies should manage cash flows and not accounting earnings when they hedge exchange rate exposures. Still, empirical evidence shows that a number of companies choose to manage accounting earnings. This empirical study of Danish, non-financial companies finds (1) that when hedging the majority of companies expect to add value to their company by avoiding financial distress (reduce down side risk), (2) that when hedging managing cash flows versus managing accounting earnings as a first priority splits the companies in two, (3) a lack of difference (except for profitability) in company characteristics between the group of companies that manage cash flows versus the group of companies that manage accounting earnings as a first priority. The decision in real business on whether to manage cash flows or accounting earnings when hedging exchange rate exposures seems to be more a function of differences in management attitudes than a function of differences in objective company characteristics.

KW - Heding

KW - Risk Management

KW - Cash Flows

KW - Accounting Earnings

KW - Non-Financial Companies

KW - HHÅ forskning

KW - Heding

KW - Risk Management

KW - Cash Flows

KW - Accounting Earnings

KW - Non-Financial Companies

KW - HHÅ forskning

M3 - Paper

Y2 - 4 June 2003 through 7 June 2003

ER -