Interaction between real options and financial hedging: Fact or fiction in managerial decision-making [An article from: Review of Financial Economics]

This digital document is a journal article from Review of Financial Economics, published by Elsevier in 2005. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
This empirical study of the exchange rate exposure management of Danish non-financial companies shows that decisions on whether or not to financially hedge an exchange rate exposure is affected by the possibility to react to changes in exchange rates by undertaking various forms of real actions (exercising real options) such as to enter new markets, change suppliers, shift production, among others. The results show that the combined interaction of a firm's size, exports, and foreign subsidiaries, as well as the firm's managerial emphasis on flexibility, are important to real options usage. These findings are important to firms in other countries with open economies.