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On the determinants of speculation - a case for extended disclosures in corporate risk management

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  • Hecht, Andreas

Abstract

We examine the determinants of corporate speculation and challenge the extant, conflicting evidence. Separating risk management (reducing currency-specific FX exposure) from speculation (increasing or holding currency-specific FX exposure constant), we provide unprecedented evidence that speculators are smaller, have more growth opportunities and possess lower internal resources than risk-managing firms. The refined granularity of our dataset stems from a unique regulatory environment, where a regulating authority recommends additional disclosures for FX risk management in excess of governing accounting standards. Our findings enable investors, henceforth, to identify speculation from public available sources, where our results substantiate the significance of such an extended reporting. Thus, this case of optional disclosures might serve as blueprint for further regulatory refinements in other settings.

Suggested Citation

  • Hecht, Andreas, 2017. "On the determinants of speculation - a case for extended disclosures in corporate risk management," Hohenheim Discussion Papers in Business, Economics and Social Sciences 15-2017, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    • Handle: RePEc:zbw:hohdps:152017
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    References listed on IDEAS

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    More about this item

    Keywords

    Foreign Exchange; Risk Management; Selective Hedging; Speculation; Disclosure; Reporting;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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