Foreign Currency Exposure and Hedging: Evidence from Foreign Acquisitions

28 Pages Posted: 15 Aug 2008 Last revised: 23 Dec 2019

See all articles by Söhnke M. Bartram

Söhnke M. Bartram

Warwick Business School - Department of Finance; Centre for Economic Policy Research (CEPR)

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). WBS Finance Group Research Paper No. 103, Available at SSRN: https://ssrn.com/abstract=1228535 or http://dx.doi.org/10.2139/ssrn.1228535

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/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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.
Anderson Hall
Riverside, CA 92521
United States
9518274284 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
109
Abstract Views
1,264
rank
14,853
PlumX Metrics