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Exchange Rate Hedging with Foreign Debt in the Spanish MarketLuis Otero GonzálezUniversidade de Santiago de Compostela - Faculty of Economic Science and Business Studies Milagros Vivel BúaUniversidade de Santiago de Compostela - Faculty of Economic Science and Business Studies Sara Fernandez LopezUniversidade de Santiago de Compostela - Faculty of Economic Science and Business Studies Pablo Duran SantomilUniversidade de Santiago de Compostela - Faculty of Economic Science and Business Studies October 25, 2008 Abstract: This paper analyzes the factors determining transactional exchange rate hedging with foreign currency debt for a sample of 56 Spanish non-financial companies listed in 2004. In particular, we analyze the variables that determine the decision to hedge with foreign currency debt as well as hedging volume. We also analyze the interaction between the foreign currency debt and derivatives in the hedging decision. Unlike previous empirical studies, which have attempted to explain the use of foreign currency debt through arguments exclusively stemming from optimal hedging theory, we have complemented the analysis with hypothesis from capital structure theory.
Number of Pages in PDF File: 45 Keywords: Exchange rate risk, hedging and capital theories, foreign debt, probit, logit, multinomial JEL Classification: F30, G15, G32, G33 working papers seriesDate posted: October 26, 2008Suggested CitationContact Information
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