Currency matching by non-financial corporations

Péter Harasztosi and Gábor Kátay

Journal of Banking & Finance, 2020, vol. 113, issue C

Abstract: The paper investigates firms’ willingness to match the currency composition of their assets and liabilities. Using detailed information at the loan contract level for the Hungarian non-financial corporate sector, the paper provides strong evidence to support the theory that currency matching plays a role in exporters’ debt currency choices. However, natural hedging is not the primary motive for firms to choose a foreign currency: it explains only 3.8 per cent of the overall new corporate foreign currency loans contracted by exporters and 2.9 per cent of the aggregate new foreign currency bank loans. Besides hedging, our results suggest that both carry trade and diversification strategies are relevant factors in firms’ currency-of-denomination decisions. Supply side factors are also found to be responsible for the prevalence of foreign currency loans among Hungarian corporate borrowers.

Keywords: Borrowing decisions; Currency matching; Carry trade; Financial crisis (search for similar items in EconPapers)
JEL-codes: F31 F34 G01 G11 G32 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:113:y:2020:i:c:s0378426620300066

DOI: 10.1016/j.jbankfin.2020.105739

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