Journal of Management Research

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The Attitude of Top UK Multinationals towards Translation Exposure


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1 Ambassador of Islamic Republic of Iran to, Sri Lanka
     

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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
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  • The Attitude of Top UK Multinationals towards Translation Exposure

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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