Foreign Currency Exposure and Hedging: Evidence from Foreign Acquisitions
Söhnke M. Bartram
Warwick Business School - Department of Finance
University of Texas at San Antonio - Department of Finance
University of South Carolina
We study the exchange rate exposures of a sample of firms that undertake large acquisitions of foreign companies. Using data from SEC filings on their foreign operations and derivatives usage, we examine how the exposures change from before to after the acquisition. We find that these deals generally lead to reduced currency exposure, which reflects the fact that most of the firms already have business in the target’s country and the mergers serve as operational hedges. In contrast, we do not find a statistically significant effect for hedging with currency derivatives despite the fact that many of the firms in the sample use such instruments.
Number of Pages in PDF File: 28
Keywords: Exchange Rates, Exposure, Hedging, Derivatives, Mergers, Acquisitions
JEL Classification: G3, F4, F3
Date posted: April 7, 2008 ; Last revised: March 10, 2014
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