TY  - JOUR
AB  - Given that it is costly, the widespread use of foreign exchange hedging is puzzling for several reasons. In an efficient market exchange rate fluctuations should even out over time. Also, exchange rate risk is generally regarded as unsystematic, and even if it is systematic investors can themselves hedge the risk. This paper answers the question of why firms hedge foreign exchange risk by invoking three agency problems. Given the existence of any of these agency problems, foreign exchange hedging does not merely impact firm risk. By smoothing cash‐flow streams, it also impacts directly firm value.
VL  - 19
IS  - 6
SN  - 0307-4358
DO  - 10.1108/eb013728
UR  - https://doi.org/10.1108/eb013728
AU  - Dobson John
AU  - Soenen Luc
PY  - 1993
Y1  - 1993/01/01
TI  - Three Agency‐Cost Reasons for Hedging Foreign Exchange Risk
T2  - Managerial Finance
PB  - MCB UP Ltd
SP  - 35
EP  - 44
Y2  - 2024/04/24
ER  -