Firm Complexity and FX Derivatives Use
26 Pages Posted: 11 Mar 2002
Date Written: February 27, 2002
Based on information considerations, we develop and test hypotheses that more complex firms are more likely to manage FX exposures rather than leaving hedging to stockholders. Our data set comprises all US firms with sales exceeding $1 billion. We specify and test proxies for firm complexity, controlling for FX exposure. Both the decision about whether to use FX derivatives and the decision on extent of use are significantly related to firm complexity.
Keywords: Corporate hedging, foreign exchange derivatives, information
JEL Classification: F31, G30
Suggested Citation: Suggested Citation