The effectiveness of foreign debt in hedging exchange rate exposure: Multinational enterprises vs. exporting firms

Soon Sung Kim, Jaiho Chung, Joon Ho Hwang and Ju Hyun Pyun

Pacific-Basin Finance Journal, 2020, vol. 64, issue C

Abstract: This study examines the effect of foreign debt use on the reduction in foreign exchange rate risk between multinational enterprises (MNEs) and exporting firms. We use manufacturing firms in Korea and find that the hedging effectiveness of foreign debt of MNEs is more salient than that of exporting firms. Results are robust after controlling for self-selection effect and alternative measurements for individual currency exposure. Our findings suggest that the effectiveness of foreign debt in reducing FX exposure is influenced by the volatility of foreign cash inflows that depends on different operating characteristics between two groups of firms.

Keywords: Foreign exchange exposure; Foreign debt; MNEs; Exporting firms (search for similar items in EconPapers)
JEL-codes: F23 G15 (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)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927538X20306673
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:64:y:2020:i:c:s0927538x20306673

DOI: 10.1016/j.pacfin.2020.101455

Access Statistics for this article

Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().