The Importance of Corporate Foreign Debt in Managing Exchange Rate Exposure in Non-Financial Companies

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This empirical study of the exchange rate exposure management of Danish non-financial firms listed on the Copenhagen Stock Exchange shows that debt denominated in foreign currency (foreign debt) is a very important alternative to the use of currency derivatives. The results show that the relative importance of foreign debt is positively related to (1) the extent of foreign subsidiaries, (2) the relative value of assets in place, and (3) the debt ratio. The pivotal role of time horizon is emphasised. These findings are important to firms in other countries with open economies.
Original languageEnglish
JournalEuropean Financial Management
Volume12
Issue4
Pages (from-to)633-649
ISSN1354-7798
Publication statusPublished - 2006

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