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Hedging Behavior by Multinational Firms

Author

Listed:
  • Raveendra N Batra

    (Southern Methodist University)

  • Shabtai Donnenfeld

    (State University of New York at Binghamton)

  • Josef Hadar

    (Southern Methodist University)

Abstract

This paper examines the impact of the presence of a forward exchange market on the financial and operational decisions of a multinational firm. The study concentrates especially on the effects of increased uncertainly and increased risk aversion on the part of the multinational firm. It is shown that the presence of the forward market allows the firm to respond to changes in uncertainly and risk aversion by adjusting its transactions in the forward market while leaving its production and sales decisions unchanged. The forward market, thus, promotes stability with respect to the operational as opposed to the financial variables; and its also makes it possible to adopt decentralized decision making.© 1982 JIBS. Journal of International Business Studies (1982) 13, 59–70

Suggested Citation

  • Raveendra N Batra & Shabtai Donnenfeld & Josef Hadar, 1982. "Hedging Behavior by Multinational Firms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 13(3), pages 59-70, September.
    • Handle: RePEc:pal:jintbs:v:13:y:1982:i:3:p:59-70
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    Cited by:

    1. Markus Hang & Jerome Geyer-Klingeberg & Andreas W. Rathgeber & Clémence Alasseur & Lena Wichmann, 2021. "Interaction effects of corporate hedging activities for a multi-risk exposure: evidence from a quasi-natural experiment," Review of Quantitative Finance and Accounting, Springer, vol. 56(2), pages 789-818, February.
    2. Zhu, Ying & Sardana, Deepak, 2020. "Multinational enterprises’ risk mitigation strategies in emerging markets: A political coalition perspective," Journal of World Business, Elsevier, vol. 55(2).

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