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Foreign Currency Exposure and Hedging: Evidence from Foreign Acquisitions

  • Söhnke M. Bartram

    ()

    (London Business School and Warwick Business School, UK)

  • Natasha Burns

    ()

    (University of Texas at San Antonio, USA)

  • Jean Helwege

    ()

    (University of South Carolina, USA)

We study the exchange rate exposures of a sample of firms that undertake large acquisitions of foreign companies. Using data from Securities and Exchange Commission (SEC) filings on their foreign operations and derivatives usage, we examine how the exposures change from before to after the acquisition. We find that these deals generally lead to reduced currency exposure, which reflects the fact that most of the firms already have business in the target's country and the mergers serve as operational hedges. In contrast, we do not find a statistically significant effect for hedging with currency derivatives despite the fact that many of the firms in the sample use such instruments.

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Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Quarterly Journal of Finance.

Volume (Year): 03 (2013)
Issue (Month): 02 ()
Pages: 1350010-1-1350010-20

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Handle: RePEc:wsi:qjfxxx:v:03:y:2013:i:02:p:1350010-1-1350010-20
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