Knut Wicksell Working Paper Series,
Lund University, Knut Wicksell Centre for Financial Studies

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 centralized FX exposure management, compared to a decentralized 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 centralization-hypothesis. Firms with a centralized approach have a statistically significant derivative premium of around 15%, whereas there is no premium for decentralized firms.

Keywords: Centralization; risk management; currency risk; derivative; hedging

JEL-codes: G30; G32

41 pages, February 24, 2013

Download statistics

• Lund University, Knut Wicksell Centre for Financial Studies
• Home page for this series

Questions (including download problems) about the papers in this series should be directed to Jens Forssbaeck ()
Report other problems with accessing this service to Sune Karlsson ().

RePEc:hhs:luwick:2013_005This page generated on 2024-09-13 22:16:11.