Abstract

Using a sample of 141 U.S. small-cap industrial firms, I examine the firm characteristics that influence its use of foreign exchange derivatives to hedge exchange rate risk. Companies in the industrial sector produce goods and services that are used for the production of another final product. The performance of this sector is closely correlated to the level of demand from the final consumer. I find firm size, the amount of foreign sales, and firm liquidity influence the firm's decision to use foreign exchange derivatives to hedge exchange rate risk. For those firms that hedge exchange rate risk using derivatives, a second test examines the firm characteristics that influence the extent of its hedging activities. I find the extent of hedging is influenced by the amount of foreign sales, the amount of foreign assets, and the number of foreign subsidiaries the firm operates. A final test examines whether certain firm characteristics influence its decision to use options as part of its hedging operations. I find no evidence that the firm characteristics examined herein influence that decision.

Notes

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Thesis Completion

2011

Semester

Spring

Advisor

Gilkeson, James H.

Degree

Bachelor of Science in Business Administration (B.S.B.A.)

College

College of Business Administration

Degree Program

Finance

Subjects

Business Administration -- Dissertations, Academic;Dissertations, Academic -- Business Administration

Format

PDF

Identifier

CFH0003787

Language

English

Access Status

Open Access

Length of Campus-only Access

None

Document Type

Honors in the Major Thesis

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Included in

Finance Commons

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