Quotation Fisch, Jan Hendrik, Puhr, Harald. 2021. Financial Hedging and Operational Flexibility as Instruments to Manage Exchange-rate Uncertainty in Multinational Corporations. Global Strategy Journal (GSJ).


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Abstract

Literature that compares the advantages of financial hedging and operational flexibility as instruments to manage exchange-rate uncertainty presents inconsistent results. This study addresses such inconsistencies in two ways. First, it clarifies that the effects of financial hedging and operational flexibility are asymmetric. Financial hedging helps an MNC to reduce a negative effect of exchange-rate uncertainty on firm value, whereas operational flexibility allows an MNC to enhance a positive effect of exchange-rate uncertainty on firm value. Second, the study demonstrates that these effects are contextual to the MNC's subsidiary network. Depending on whether exchange-rate correlation in the subsidiary network is positive or negative, either financial hedging or operational flexibility is more effective than the other. Regressions on a sample of U.S. manufacturing firms support the predictions.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Global Strategy Journal (GSJ)
Citation Index SSCI
WU-Journal-Rating new STRAT-B, WH-B
Language English
Title Financial Hedging and Operational Flexibility as Instruments to Manage Exchange-rate Uncertainty in Multinational Corporations
Year 2021
Reviewed? Y
URL https://onlinelibrary.wiley.com/doi/10.1002/gsj.1406
DOI http://doi.org/10.1002/gsj.1406
Open Access N

Associations

People
Fisch, Jan Hendrik (Details)
Puhr, Harald (Details)
Organization
Department of Global Business and Trade DP (Details)
Competence Center for Emerging Markets and CEE WE (Details)
Institute for International Business (Fisch) (Details)
Research areas (Ă–STAT Classification 'Statistik Austria')
5307 Business and management economics (Details)
5344 Foreign trade (Details)
5350 Innovation research (Details)
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