The introduction of the Euro and derivative use in French firms

John Capstaff, Andrew Marshall, Julie Hutton

Research output: Contribution to journalArticlepeer-review

12 Citations (Scopus)

Abstract

In January 1999 several European countries adopted a common currency, the "euro". This important economic event provided an opportunity to examine the determinants of risk management in an environment where exposure to foreign exchange (FX) risk was considerably reduced. For a sample of French firms we found the decline in the use of FX derivatives was greater for firms with substantial sales within the euro zone and less for firms in industries that still had significant imports from outside the euro zone. The focus on derivatives adds to existing research, as it is a more explicit indicator of a reduction in the resources devoted to hedging. The reduction in hedging was not in direct proportion to the reduction in FX exposure, implying that euro risk was hedged more intensely than French franc risk in the sample of French firms over the chosen years.
Original languageEnglish
Pages (from-to)1-17
Number of pages16
JournalJournal of International Financial Management and Accounting
Volume18
Issue number1
DOIs
Publication statusPublished - 2007

Keywords

  • euro
  • european union
  • financial management
  • derivatives
  • accountancy

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