Financial Distress Risk and the Hedging of Foreign Currency Exposure
M. Martin Boyer () and
Monica Marin ()
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Monica Marin: Department of Finance, HEC Montréal, Université de Montréal, 3000, chemin de la Côte-Sainte-Catherine, Montréal, Québec, Canada H3T 2A7, Canada
Quarterly Journal of Finance (QJF), 2013, vol. 03, issue 01, 1-36
We examine the use of foreign currency hedging instruments by US manufacturing firms during 1996–2004, and assess their impact on the firms' risk of financial distress. We derive measures of financial distress using the Black–Scholes–Merton option pricing model and find that the use of foreign currency hedging instruments reduces the firms' financial distress. The main findings are confirmed when examining alternate measures of foreign currency exposure, econometric specifications or measures of financial distress.
Keywords: Foreign currency exposure; financial distress; risk management (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:wsi:qjfxxx:v:03:y:2013:i:01:n:s201013921350002x
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