The impact of the introduction of the Euro on the foreign exchange risk management in UK multinational companies

Eilidh Christie, Andrew Marshall

Research output: Contribution to journalArticle

10 Citations (Scopus)

Abstract

One of the arguments in favour of the euro is that it will eliminate foreign exchange risk for companies in the euro-zone. There could also be benefits for companies outside this zone, although their currency risk with the euro remains. This paper considers this, by examining the effect of the euro on the currency risk management of UK multinational companies (MNCs). Using the responses from a questionnaire and interviews we found that the euro, which is being widely used in UK MNCs, is generally favoured due to reductions in exchange uncertainty and costs of managing currency risk. Nonetheless, contrary to what would theoretically be expected, there was no exact relationship in the reduction in hedging activity accompanied by this reduction in risk. The majority of MNCs stated that their hedging activities would remain unchanged. The capacity of MNCs to benefit from reductions in risk and hedging depend on the proportion of non-UK European trade, the industry sector and the ability to transfer risk down the supply chain. Finally, despite the reductions in currency exposure experienced by the majority of companies the euro will not encourage UK MNCs to expand international trade.
LanguageEnglish
Pages419-434
Number of pages15
JournalEuropean Financial Management
Volume7
Issue number3
DOIs
Publication statusPublished - Sep 2001

Fingerprint

Multinational companies
Risk management
Foreign exchange risk
Currency risk
Hedging
Euro zone
Supply chain
Currency exposure
Costs
Proportion
Risk transfer
Industry
Questionnaire
Uncertainty
International trade

Keywords

  • euro
  • foreign exchange
  • risk management
  • financial management

Cite this

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The impact of the introduction of the Euro on the foreign exchange risk management in UK multinational companies. / Christie, Eilidh; Marshall, Andrew.

In: European Financial Management, Vol. 7, No. 3, 09.2001, p. 419-434.

Research output: Contribution to journalArticle

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