Date of this Version
The Journal of Finance
We examine the use of currency derivatives in order to differentiate among existing theories of hedging behavior. Firms with greater growth opportunities and tighter financial constraints are more likely to use currency derivatives. This result suggests that firms might use derivatives to reduce cash flow variation that might otherwise preclude firms from investing in valuable growth opportunities. Firms with extensive foreign exchange-rate exposure and economies of scale in hedging activities are also more likely to use currency derivatives. Finally, the source of foreign exchange-rate exposure is an important factor in the choice among types of currency derivatives.
This is the peer reviewed version of the following article: GÉCZY, C., MINTON, B. A. and SCHRAND, C. (1997), Why Firms Use Currency Derivatives. The Journal of Finance, 52: 1323–1354., which has been published in final form at DOI: 10.1111/j.1540-6261.1997.tb01112.x. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving http://olabout.wiley.com/WileyCDA/Section/id-820227.html#terms.
Geczy, C. C., Minton, B. A., & Schrand, C. M. (1997). Why Firms Use Currency Derivatives. The Journal of Finance, 52 (4), 1323-1354. http://dx.doi.org/10.1111/j.1540-6261.1997.tb01112.x
Date Posted: 27 November 2017
This document has been peer reviewed.