The management of strategic exchange risk: evidence from corporate practices

Dhanani, Alpa; Groves, R. E. V.

doi:10.1080/00014788.2001.9729620

Cited by 11 publications

(6 citation statements)

References 22 publications

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“…Willett (1986) analysed the risk of instability in the exchange rate to specific industries and found that instability can have a negative, a positive or no effect on trade. Dhanani and Groves (2001) developed models to illustrate that volatility in exchange rates has an ambiguous effect on the volume of international trade. Employing a partial equilibrium approach, Barkoulas, Baum, and Caglayan (2002) showed that the effect of exchange rate uncertainty on the volume of trade depends on the source of the uncertainty.…”

Section: Introductionmentioning

confidence: 99%

Does exchange rate volatility discourage international trade? A meta-regression analysis

Haile

Pugh

2013

The Journal of International Trade & Economic Development

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Since the breakdown of the Bretton Woods agreement, the trade effect of exchange rate variability (ERV) has been contentious. However, neither the theoretical nor the empirical literature provides unambiguous guidance on the trade effect of ERV. This article applies metaregression analysis to the empirical literature and finds evidence of: modest publication bias; a range of authentic empirical effects that are highly conditional, even with respect to sign and, correspondingly, pronounced heterogeneity in the reported results. Investigation of this heterogeneity reveals that the results are significantly influenced both by authors' modelling strategies and by the contexts of their investigations. In particular, researchers are most likely to find an adverse trade effect by investigating low-frequency real exchange variability and trade between less developed economies, hence, beyond the reach of hedging opportunities (as suggested by previous studies). In general, our most important advice for policy makers is that economic research does not reveal a single representative effect size.

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Section: Introductionmentioning

confidence: 99%

Does exchange rate volatility discourage international trade? A meta-regression analysis

Haile

Pugh

2013

The Journal of International Trade & Economic Development

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“…Marsden & Prevost (2005) (Makar et al, 1999). Dhanani & Groves (2001) use qualitative research methodology in examining the responses of multinational companies, their organisational structures, systems and managers to strategic exchange rate risk. They therefore document that the management of exchange rate risk as a whole appears to have been an evolutionary process with companies progressing gradually from the management of translation risk in the 1970s to that of transaction risk in the 1980s, and more recently to strategic exchange rate risk management (Dhanani & Groves, 2001).…”

Section: Hedging Currency Riskmentioning

confidence: 99%

Documenting the Interest for Strategies in Hedging Currency Risk: From Theory to Practice

Bonaci

Filip

Strouhal

et al. 2012

ecoman

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Paper offers an accounting perspective to hedging currency risk from both a theoretical and practical perspective. From the theoretical point of view we first position the study by considering historical developments of accounting research literature. Furthermore, we mainly look at currency hedging techniques being established through trade literature and practice while developing an overview of research literature. On the other hand, there are also analyzed the use of techniques for hedging currency risk in practice. The employed research methodology includes literature review specific methods. The objective of this paper is to document the necessity of developing an adequate system of surveillance and control measures imposed through the certainty of currency risk itself. The purpose and benefit in developing such a system as a component of sound corporate governance policies would be to limit companies' exposure to currency risk.

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“…For example, in 2003, a number of major European multinationals grew increasingly concerned over the depreciation of the dollar. Given the generally significant contribution of profits earned in dollars to total profits, the depreciation of the dollar resulted in the deterioration of reported earnings per share (Dhanani and Groves, 2001;Hagelin, 2003;Nazarboland, 2003). Fourth, MNCs could be interested in preserving the integrity of balance sheet ratios, particularly if the company has to honor financial covenants or other restrictions imposed by creditors.…”

Section: Introductionmentioning

confidence: 99%

“…Firms experiencing continuous translation losses may experience deteriorating leverage and profitability ratios. To the extent that this process leads to an increase in the cost of debt financing, it could also affect the value of the firm (Dhanani and Groves, 2001;Hagelin, 2003;Eiteman, Stonehill and Moffet, 2004;Kisgen, 2006;2007).…”

Section: Introductionmentioning

confidence: 99%