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Operational and Financial Hedging: Evidence from Export and Import Behavior

Author

Listed:
  • Olga Kuzmina

    (New Economic School)

  • Olga Kuznetsova

    (New Economic School)

Abstract

We use hand-collected data on a sample of German public firms during 2011-2014 to show that firms use currency derivatives more often when they export or import, and especially when exchange-rate fluctuations are larger, but to a lesser extent when having high export and import shares simultaneously. We interpret this finding as evidence of operational hedging that arises as foreign-denominated revenues and costs match, and substitutes for financial hedging. Our identification strategy uses both cross-sectional heterogeneity in exchange-rate exposures and time-series variation in exchange-rate fluctuations. We highlight the importance of examining operating strategies as integral determinants of corporate financing policies.

Suggested Citation

  • Olga Kuzmina & Olga Kuznetsova, 2017. "Operational and Financial Hedging: Evidence from Export and Import Behavior," Working Papers w0242, New Economic School (NES).
    • Handle: RePEc:abo:neswpt:w0242
    as

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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • 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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