Journal of Management Research

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

The Attitude of Top UK Multinationals towards Translation Exposure


Affiliations
1 Ambassador of Islamic Republic of Iran to, Sri Lanka
     

   Subscribe/Renew Journal


The objective of this paper is to investigate the behavior of top UK multinational corporations toward hedging translation exposure. According to the results, a very notable variation exists among the surveyed corporations as to the degree of importance they place on hedging this type of exposure. While translation exposure is principal currency risk with a few of them, a number of the said corporations are of the view that such an exposure is immaterial and need not be hedged. Likewise, while in case of the latter corporations no hedging technique is being utilised, as far as the former corporations are concerned, some of them are resorting to a package of corporate internal and market external hedging instruments to manage translation exposure. Furthermore, those firms that employ solely the internal techniques are widely using matching technique (natural hedge), an indication that they are more concerned with their net asset translation risk exposure than earnings exposure. The results also indicate that there exist differing practices toward managing and hedging translation exposure among the surveyed corporations in the same classes of business, an indication which might lead to a suggestion that firms as such might adopt their policy in this regard according to their discretion and their own specific position.

Keywords

Translation Exposure, Hedging Techniques, Multinational Corporations
User
Notifications

  • Bishop P. and Dixon, D. (1992), Foreign Exchange Handbook, McGraw Hill International Edition.

  • Donough, W.J. (1993), Global Derivatives Market, FRBNY Quarterly Review, 1-5.

  • Ensor, R. and Muller, P.(1981), The Essentials of Treasury Management, Euromoney Publications.

  • Haseltine. John B. (1981), A Longer-term Approach, The Essentials of Treasury Management, Euromoney Publications, Edited by Ensor R. and Muller P.

  • International Accounting Standards: Financial Instruments Accounting. Sep (2000). KPMG.

  • International Chamber of Commerce (ICC). March (1985), Managing Exchange Rate Risks, ICC Publishing S.A. Publication No.422.

  • Joseph, Nathan Lael (2000), The Choice of Hedging Techniques and the Characteristics of the UK Industrial Firms, Journal of Multinational Financial Management, 10, 161-184.

  • Krishnamoorthy, A. (2001), Industrial Structure and the Exchange Rate Exposure of Portfolio Returns , Global Finance Journal, 12, 285- 297.

  • Marshal, Andrew P. (2000), Foreign Exchange Risk Management in UK, USA and Asia Pacific Multinational Companies, Journal of Multinational Financial Management, 10, 165-211.

  • Nazarboland, G. (1999, a), Foreign Exchange Risk Management Policy: A Modified Approach, Chartered Secretary: The Journal for Corporate Professionals, Vol. XXIX (12), 1404-1411.

  • Nazarboland, G. (1999, b), Techniques For Hedging Corporate Foreign Exchange Exposure. Unpublished Ph.D Dissertation, University of Delhi.

  • Prindle, Andreas R. (1976), Guideline for MNC Money Manager, Harvard Business Review, January – February, 73-80.

  • Rodringuez, R.M. (1980), Foreign Exchange Management in US Multinationals, University of Illinois at Chicago Circle.

  • Shapiro, Alan C. (1991), Foundation of Multinational Financial Management.

  • Shin, Hyun-Han, Soenen, Luc. (1999), Exposure to Currency Risk by US Multinational Corporations, Journal of Multinational Financial Management, 9, 195-207.

  • Srinivasulu, S.L. (1983), Classifying Foreign Exchange Exposure, Financial Executive, February, 36-44.

  • Swann, David, and Precious, John. (1996), The Business of Finance: A Treasury Policy Blueprint, The Association of Corporate Treasurers.

  • The Times 1000: FT Extel, 2 Dec 1996, Martin Barrow (Editor).

  • Winstone, D. (1995), Financial Derivatives: Hedging with Future, Forwards, Options & Swaps, Champam & Hall, first edition.


Abstract Views: 335

PDF Views: 1




  • The Attitude of Top UK Multinationals towards Translation Exposure

Abstract Views: 335  |  PDF Views: 1

Authors

Gholamreza Nazarboland
Ambassador of Islamic Republic of Iran to, Sri Lanka

Abstract


The objective of this paper is to investigate the behavior of top UK multinational corporations toward hedging translation exposure. According to the results, a very notable variation exists among the surveyed corporations as to the degree of importance they place on hedging this type of exposure. While translation exposure is principal currency risk with a few of them, a number of the said corporations are of the view that such an exposure is immaterial and need not be hedged. Likewise, while in case of the latter corporations no hedging technique is being utilised, as far as the former corporations are concerned, some of them are resorting to a package of corporate internal and market external hedging instruments to manage translation exposure. Furthermore, those firms that employ solely the internal techniques are widely using matching technique (natural hedge), an indication that they are more concerned with their net asset translation risk exposure than earnings exposure. The results also indicate that there exist differing practices toward managing and hedging translation exposure among the surveyed corporations in the same classes of business, an indication which might lead to a suggestion that firms as such might adopt their policy in this regard according to their discretion and their own specific position.

Keywords


Translation Exposure, Hedging Techniques, Multinational Corporations

References