Scale economies in hedging foreign exchange cash flow exposures

2004 ◽  
Vol 15 (1) ◽  
pp. 17-27 ◽  
Author(s):  
Anna D Martin ◽  
Laurence J Mauer
Keyword(s):  
Foreign Exchange ◽  
Cash Flow ◽  
Scale Economies

Modelling foreign exchange rate transaction exposure of UK insurance companies

2016 ◽  
Vol 32 (2) ◽  
pp. 120-136
Author(s):  
Islam Amer
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Cash Flow ◽  
Estimation Method ◽  
Foreign Exchange Rate ◽  
Insurance Companies ◽  
Content Type ◽  
Flow Estimation ◽  
Life Insurers ◽  
Short And Long Term

Purpose The purpose of this paper is to study the sensitivity of foreign exchange exposure through the cash flow estimation method using a sample of 59 UK insurance companies. This approach allows a decomposition of exposures into short- and long-term components. By revealing the nature of their cash flow exposures, companies can evaluate the effectiveness of their hedging programmes and focus their hedging efforts according to the nature of their exposures. Design/methodology/approach Martin and Mauer’s (2003, 2005) three-stage model is used to estimate foreign exchange rate transaction exposures for the sample of 65 UK insurance companies over the period 2004-2013. However, this paper has one important innovation to this method. Instead of the model used in previous papers, the paper uses a model from the actuarial field that was proposed by Blum et al. (2001) for modelling foreign exchange rates with their relevant constituents (inflation and interest rate). Findings The evidence shows that the currency transaction exposure for non-life insurers is greater than that of life insurers. Moreover, the author finds that large insurers exhibit lower frequencies of foreign exchange transaction exposure than small insurers. Originality/value The value of this paper comes from the fact that revealing the nature of cash flow exposures, companies can evaluate the effectiveness of their hedging programmes and focus their hedging efforts according to the nature of their exposures.

Thailand

2021 ◽  
pp. 93-126
Author(s):  
Richard F. Doner ◽  
Gregory W Noble ◽  
John Ravenhill
Keyword(s):  
Product Design ◽  
Foreign Exchange ◽  
Capital Stock ◽  
Scale Economies ◽  
Primary Case ◽  
Capital Goods ◽  
Domestic Firms ◽  
Excise Taxes ◽  
Policy Interventions ◽  
Automotive Assembly

Thailand is our primary case of successful extensive development. The impressive volume of Thai-based automotive assembly and vehicle and parts exports, the largest in the ASEAN region, reflects a highly efficient assembly base, dominated by foreign assemblers and component producers and driven largely by growth of capital stock rather than by indigenous productivity. This trajectory has been the result of deliberate policy interventions, such as automotive FDI incentives, excise taxes and tariffs designed to promote scale economies, and cluster-related infrastructure. These policies have been formulated and implemented by relatively cohesive institutional networks motivated by broader economic concerns, especially foreign exchange problems. Yet those same factors have not resulted in intensive growth: a manufacturing complex based at least in part on domestic firms producing parts and components, providing intermediate and capital goods, improving processes, and participating in product design.

scholarly journals Effects of Hedging Foreign Exchange Risk on Financial Performance of Non-Banking Companies Listed at the Nairobi Securities Exchange

2017 ◽  
Vol 13 (10) ◽  
pp. 402
Author(s):  
Onesmus Mutunga Nzioka ◽  
Faith M. Maseki
Keyword(s):  
Risk Management ◽  
Financial Performance ◽  
Interest Rates ◽  
Foreign Exchange ◽  
Cash Flow ◽  
Assessment Procedure ◽  
Currency Risk ◽  
Foreign Exchange Risk ◽  
Sales Revenue ◽  
Exchange Risk

The general objective of this study was to establish the effects ofhedging foreign exchange risk on financial performance of non-bankingcompanies listed at the Nairobi securities exchange. A descriptive researchdesign was adopted on the target population of 49 non-banking firms listed atthe NSE. Primary data collected using a questionnaire was used containingboth open and close ended questions. Data was analyzed using SPSS togenerate descriptive statistics such as percentages, frequency distribution,measures of central tendencies (mean) and the data was presented in tables.The study conducted multiple regression analysis to establish the extent towhich the hedging techniques affected firm’s performance. The resultsshowed that, taking all factors into account (internal hedging techniques,external hedging technique, inflation and interest rates) performance of nonfinancialfirms would be 0.564. The findings presented further indicated thatinternal hedging had the greatest effect on the firm performance (β = 0.551),Inflation (β = 0.322), External hedging (β = 0.133 while interest rate (β =0.024) had the least effect to the firms performance. However, all thevariables were significant (p<0.05). Hedging techniques affected firm’sperformance i.e. profitability, sales revenue and the cash flow and liquidityposition of the firm. The internal techniques were more effective on theperformance than the external techniques. The four independent variablesstudied accounted for 75.5% of the variations in non-banking firms’performance as represented by the adjusted R2. This therefore means the fourvariables contribute to 75.5% of performance, while other factors not studiedin this research contributes 24.5%. The study recommends that, firmsdevelop a robust foreign exchange risk management framework whichclearly shows its currency risk assessment procedure and implementation of currency risk management strategies. It also recommends that the variousaspects of firm’s financial performance be taken into consideration beforeadopting a particular technique to hedge to protect cash flow, liquidity,profitability and sales revenue.

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