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Foreign Currency Hedging and Firm Productive Efficiency

Author

Listed:
  • S. Boubaker

    (Métis Lab EM Normandie - EM Normandie - École de Management de Normandie)

  • R. Manita

    (NEOMA - Neoma Business School)

  • S. Mefteh-Wali

    (ESSCA - Ecole Supérieure des Sciences Commerciales d'Angers)

Abstract

This study assesses whether foreign currency (FC) hedging improves firm productive efficiency. Using a unique sample of French non-financial listed firms belonging to the CAC All-Tradable index (former SBF250 index) index over the period 2004\textendash2012, we employ a non-parametric method\textemdashdata envelopment analysis\textemdashto estimate a firm's efficiency frontier and analyze the role of financial hedging in addressing agency conflicts in France. The empirical results show that FC hedging has a significant positive effect on efficiency. This finding supports the theoretical view that hedging is a disciplinary device that can mitigate the owner\textendashmanager agency conflicts, leading to a better firm efficiency. The results are robust to a battery of sensitivity and endogeneity tests. \textcopyright 2020, Springer Science+Business Media, LLC, part of Springer Nature.

Suggested Citation

  • S. Boubaker & R. Manita & S. Mefteh-Wali, 2022. "Foreign Currency Hedging and Firm Productive Efficiency," Post-Print hal-04452666, HAL.
    • Handle: RePEc:hal:journl:hal-04452666
    DOI: 10.1007/s10479-020-03730-5
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    More about this item

    Keywords

    Data envelopment analysis; Derivatives use; Financial hedging; Foreign currency hedging;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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