Foreign Currency Exposure and Hedging: Evidence from Foreign Acquisitions

28 Pages Posted: 7 Apr 2008 Last revised: 10 Mar 2014

Söhnke M. Bartram

Warwick Business School - Department of Finance

Natasha Burns

University of Texas at San Antonio - Department of Finance

Jean Helwege

UC Riverside

Multiple version iconThere are 5 versions of this paper

Date Written: July 2013

Abstract

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.

Keywords: Exchange Rates, Exposure, Hedging, Derivatives, Mergers, Acquisitions

JEL Classification: G3, F4, F3

Suggested Citation

Bartram, Söhnke M. and Burns, Natasha and Helwege, Jean, Foreign Currency Exposure and Hedging: Evidence from Foreign Acquisitions (July 2013). Available at SSRN: https://ssrn.com/abstract=1116409 or http://dx.doi.org/10.2139/ssrn.1116409

Söhnke M. Bartram

Warwick Business School - Department of Finance ( email )

Coventry, CV4 7AL
United Kingdom
+44 (24) 7657 4168 (Phone)
+1 425 952 1070 (Fax)

HOME PAGE: http://go.warwick.ac.uk/sbartram/

Natasha Burns

University of Texas at San Antonio - Department of Finance ( email )

San Antonio, TX 78249
United States
210-458-6838 (Phone)

Jean Helwege (Contact Author)

UC Riverside ( email )

900 University Ave
Riverside, CA 92521
United States

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