Thai hedging practices : post Asian financial crisis

Boulter, Terry and Wongchan, Vanlapa 2010, Thai hedging practices : post Asian financial crisis, in The Asian Business and Management Conference : Conference proceedings 2010, iafor, Kitanagoya, Japan, pp. 628-644.

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Title Thai hedging practices : post Asian financial crisis
Author(s) Boulter, Terry
Wongchan, Vanlapa
Conference name Asian Business & Management Conference (1st : 2010 : Osaka, Japan)
Conference location Osaka, Japan
Conference dates 7-9 Oct. 2010
Title of proceedings The Asian Business and Management Conference : Conference proceedings 2010
Editor(s) Haldane, Joseph
Publication date 2010
Conference series Asian Business and Management Conference
Start page 628
End page 644
Publisher iafor
Place of publication Kitanagoya, Japan
Keyword(s) Foreign exchange
Risk management
Summary This paper provides survey evidence captured from a sample of 113 respondents to a 2008 questionnaire that was sent to 344 listed non-financial companies in Thailand. The study examines how Thai companies manage their exchange rate exposure post Asian Financial Crisis.

Thailand is an interesting case study because it was a country at the core of the 1997 financial meltdown and was one of the first forced by the crisis to move from a fixed to a floating exchange rate regime. It is therefore constructive to examine how businesses in Thailand have coped with a shift from a fixed to floating exchange rate and to examine how they manage their exchange rate exposure post 1997.

Findings indicate that companies that use currency derivatives do so to reduce volatile cash flows are less risky and tend to be more profitable than companies that do not use currency derivatives. This is consistent with the theory that hedging increases the value of the firm.

The type of instruments that companies in Thailand use and how they are used is similar to what other studies find in other countries. Matching and the use of forward contracts are the most common ways that companies manage transaction exposure. The study also confirms that companies with higher levels of international business engagement are more likely to use currency derivatives.

What is unique in Thailand is that Thai businesses are less rigorous in their internal control of their currency hedging activities. It is therefore recommended that companies consider a documented hedging policy and that senior management actively monitor the policy and currency hedging activity.
ISSN 2185-5862
Language eng
Field of Research 150201 Finance
Socio Economic Objective 900101 Finance Services
HERDC Research category E1 Full written paper - refereed
Copyright notice ©2010, The International Academic Forum
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