Exchange Rate Hedging with Foreign Debt in the Spanish Market

González, Luís Otero; Búa, Milagros Vivel; López, Sara Fernández; Santomil, Pablo Durán

doi:10.2139/ssrn.1289562

Cited by 1 publication

(2 citation statements)

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“…We use panel-data econometrics on a data panel strongly balanced, with 342 nonfinancial firms listed in the period 2008-2016 (3,078 observations). Following prior validated methodology (Nance et al, 1993;Allayannis & Ofek, 2001;Clark & Judge, 2008;Otero González et al, 2010), we developed a Logit model (Equation I) to identify whether the explanatory variables increase the likelihood for the firm to hedge FXR (the dependent variable equals 1) or not (the dependent variable equals 0):…”

Section: Methodsmentioning

confidence: 99%

“…The set of explanatory variables are the following: We estimate whether the firm is obtaining tax benefits through the variable income tax payable (ITP) scaled with total assets (Nance et al, 1993;Judge, 2006;Clark & Judge, 2008;Otero González et al, 2010;Donohoe, 2015) Following prior research (Clark & Judge, 2008;Marshall, Kemmitt, & Pinto, 2013;Tanha & Dempsey, 2017), Leverage is estimated as the book value of debt over the market value of the company. We measure ICR through the EBIT over interest expenses (Berkman & Bradbury, 1996;Clark & Judge, 2008) to estimate the firm's capacity to pay back the financial costs of the debt.…”

Section: Methodsmentioning

confidence: 99%

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Determinants of foreign exchange risk management in Latin American firms

Giraldo-Prieto

Barberá

Sogorb-Mira

2019

ARLA

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Purpose The purpose of this paper is to identify whether Latin American (LA) firms are adopting any hedging strategy when designing foreign exchange risk (FXR) measures. To that end, the authors explore the impact of several drivers of FXR management. Design/methodology/approach The sample consists of 342 non-financial listed firms established in a group of representative countries of the LA region and covers the period from 2008 to 2016. Hypothesis testing is performed through a Logit model that measures the likelihood to adopt hedging practices. In addition, a Tobit test offers further insights into the derivatives users. Findings The authors corroborate capital structure-related hypotheses such as tax goals, financial distress, liquidity and growth opportunities. In addition, both ownership concentration and income tax payable seem to be negative and significant determinants of FXR coverage. Originality/value Results reported in this study are relevant for the LA region with high tradition in raw materials and commodities exports. The results show that LA firms still make limited use of derivatives and there is still much room for improvement. Hence, additional efforts to promote FXR hedging should be desirable, to meet authorities’ recommendations (OECD et al., 2007). Further research exploring corporate governance relationships and differences between large and small firms might be helpful.

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Section: Methodsmentioning

confidence: 99%