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Thai hedging practices : post Asian financial crisis

conference contribution
posted on 2010-01-01, 00:00 authored by Terry Boulter, V Wongchan
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.

History

Event

Asian Business & Management Conference (1st : 2010 : Osaka, Japan)

Pagination

628 - 644

Publisher

iafor

Location

Osaka, Japan

Place of publication

Kitanagoya, Japan

Start date

2010-10-07

End date

2010-10-09

ISSN

2185-5862

Language

eng

Publication classification

E1 Full written paper - refereed

Copyright notice

2010, The International Academic Forum

Editor/Contributor(s)

J Haldane

Title of proceedings

The Asian Business and Management Conference : Conference proceedings 2010

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