Currency hedging and corporate governance: A cross-country analysis

Ugur Lel

Journal of Corporate Finance, 2012, vol. 18, issue 2, 221-237

Abstract: This paper examines the impact of the strength of governance on firms' use of currency derivatives. Using a sample of firms from 30 countries over the period 1990 to 1999, we find that strongly governed firms tend to use derivatives to hedge currency exposure and overcome costly external financing. On the other hand, weakly governed firms appear to use derivatives mostly for managerial reasons. These results are robust to alternative measures of corporate governance, various subsamples, the use of foreign denominated debt as an alternative strategy to hedge currency exposure, and a potential selection bias. Overall, the results serve as the first comprehensive evidence of the impact of firm- and country-level corporate governance on firms' use of derivatives.

Keywords: Derivatives; Corporate governance; Hedging; International finance (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (51)

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Working Paper: Currency hedging and corporate governance: a cross-country analysis (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:18:y:2012:i:2:p:221-237

DOI: 10.1016/j.jcorpfin.2011.12.002

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