Exchange Rate Hedging with Foreign Debt in the Spanish Market

45 Pages Posted: 26 Oct 2008

See all articles by Luis Otero González

Luis Otero González

Universidade de Santiago de Compostela - Faculty of Economic Science and Business Studies

Milagros Vivel Búa

Universidade de Santiago de Compostela - Faculty of Economic Science and Business Studies

Sara Fernandez Lopez

Universidade de Santiago de Compostela - Faculty of Economic Science and Business Studies

Pablo Duran Santomil

Universidade de Santiago de Compostela - Faculty of Economic Science and Business Studies

Date Written: 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.

Keywords: Exchange rate risk, hedging and capital theories, foreign debt, probit, logit, multinomial

JEL Classification: F30, G15, G32, G33

Suggested Citation

Otero González, Luis and Vivel Búa, Milagros and Fernandez Lopez, Sara and Duran Santomil, Pablo, Exchange Rate Hedging with Foreign Debt in the Spanish Market (October 25, 2008). Available at SSRN: https://ssrn.com/abstract=1289562 or http://dx.doi.org/10.2139/ssrn.1289562

Luis Otero González

Universidade de Santiago de Compostela - Faculty of Economic Science and Business Studies ( email )

Avda. Juan XXIII s/n
Santiago, A Coruña 15704
Spain

Milagros Vivel Búa (Contact Author)

Universidade de Santiago de Compostela - Faculty of Economic Science and Business Studies ( email )

Avda. Juan XXIII s/n
Santiago, A Coruña 15704
Spain
981 563100 Ext.11606 (Phone)

Sara Fernandez Lopez

Universidade de Santiago de Compostela - Faculty of Economic Science and Business Studies ( email )

Avda. Juan XXIII s/n
Santiago, A Coruña 15704
Spain

Pablo Duran Santomil

Universidade de Santiago de Compostela - Faculty of Economic Science and Business Studies ( email )

Faculty of Economic Science and Business Studies
Av/Burgo das Nacións s/n
Santiago, A Coruña 15704
Spain

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