Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaper › Journal article › Research › peer-review
The German Humpback : Internationalization and Foreign Exchange Hedging. / Aabo, Tom; Ploeen, Rasmus.
In: Journal of Multinational Financial Management, Vol. 27, 2014, p. 114-129.Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaper › Journal article › Research › peer-review
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TY - JOUR
T1 - The German Humpback
T2 - Internationalization and Foreign Exchange Hedging
AU - Aabo, Tom
AU - Ploeen, Rasmus
N1 - Campus adgang til artiklen / Campus access to the article
PY - 2014
Y1 - 2014
N2 - Previous studies find a monotonic positive relationship between a firm’s internationalization and its foreign exchange hedging. We argue that high levels of internationalization can reduce the need for foreign exchange hedging through diversification (e.g. sales to several markets) and operational hedging (matching of cash flows and operational flexibility). We employ multivariate regression analysis and find an inverse U-shape relationship (“humpback”) for large listed non-financial German firms. Foreign exchange hedging activity peaks when half of sales (or long-term assets) is outside Europe. We do not find support that diversification or production facilities abroad drive our results. Our paper is the first empirical paper to document an inverse U-shape relationship between internationalization and foreign exchange hedging.
AB - Previous studies find a monotonic positive relationship between a firm’s internationalization and its foreign exchange hedging. We argue that high levels of internationalization can reduce the need for foreign exchange hedging through diversification (e.g. sales to several markets) and operational hedging (matching of cash flows and operational flexibility). We employ multivariate regression analysis and find an inverse U-shape relationship (“humpback”) for large listed non-financial German firms. Foreign exchange hedging activity peaks when half of sales (or long-term assets) is outside Europe. We do not find support that diversification or production facilities abroad drive our results. Our paper is the first empirical paper to document an inverse U-shape relationship between internationalization and foreign exchange hedging.
KW - Operational flexibility
KW - Internationalization
KW - Foreign exchange hedging
KW - Diversification
KW - Cash flow matching
U2 - 10.1016/j.mulfin.2014.05.001
DO - 10.1016/j.mulfin.2014.05.001
M3 - Journal article
VL - 27
SP - 114
EP - 129
JO - Journal of Multinational Financial Management
JF - Journal of Multinational Financial Management
SN - 1042-444X
ER -