Operational Hedges and the Foreign Exchange Exposure of U.S. Multinational Corporations

Oklahoma State University Working Paper

30 Pages Posted: 11 Dec 2000

See all articles by Christos Pantzalis

Christos Pantzalis

University of South Florida

Paul A. Laux

University of Delaware - Alfred Lerner College of Business and Economics

Betty J. Simkins

Oklahoma State University - Stillwater - Department of Finance

Date Written: October 2000

Abstract

This paper examines the impact of operational hedges of US multinational corporations (MNCs) on their exchange rate exposure. The two important contributions of this study are as follows. First, this study documents the importance of operational hedges as significant determinants of exchange rate risk as measured by "breadth" and "depth" dimensions of the MNC foreign subsidiary network. Second, this finding remains robust even after examining the impact of operational hedges on exposure separately for net exporting and net importing MNCs.

Keywords: operational hedges, exchange rate risk, risk management, derivatives

JEL Classification: F23, F31

Suggested Citation

Pantzalis, Christos and Laux, Paul A. and Simkins, Betty J., Operational Hedges and the Foreign Exchange Exposure of U.S. Multinational Corporations (October 2000). Oklahoma State University Working Paper. Available at SSRN: https://ssrn.com/abstract=250045 or http://dx.doi.org/10.2139/ssrn.250045

Christos Pantzalis

University of South Florida ( email )

Tampa, FL 33620-5500
United States
(813) 974-3262 (Phone)

Paul A. Laux

University of Delaware - Alfred Lerner College of Business and Economics ( email )

Office 306 Purnell Hall
Newark, DE 19716
United States
302-831-6598 (Phone)
302-831-3061 (Fax)

Betty J. Simkins (Contact Author)

Oklahoma State University - Stillwater - Department of Finance ( email )

336 Business Building
Stillwater, OK 74078-4011
United States
405-744-8625 (Phone)
405-744-5180 (Fax)

HOME PAGE: http://spears.okstate.edu/~simkins

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