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Does Centralisation of FX Derivative Usage Impact Firm Value?

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  • HÃ¥kan JankensgÃ¥rd

Abstract

Previous research has shown that firms identified as derivative users tend to be valued at a premium relative to non†users. In this paper I develop the hypothesis that the ‘derivative premium’ is higher in firms with centralised FX exposure management, compared to a decentralised approach in which subsidiaries retain bank contacts and/or decision†making authority. This study benefits from unique survey data on the FX management practices and derivative usage of Swedish listed firms. The data supports the centralisation†hypothesis. Firms with a centralised approach have a statistically significant derivative premium of around 15%, whereas there is no premium for decentralised firms.

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  • HÃ¥kan JankensgÃ¥rd, 2015. "Does Centralisation of FX Derivative Usage Impact Firm Value?," European Financial Management, European Financial Management Association, vol. 21(2), pages 309-332, March.
    • Handle: RePEc:bla:eufman:v:21:y:2015:i:2:p:309-332
    DOI: 10.1111/j.1468-036X.2013.12014.x
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