Thai hedging practices : post Asian financial crisis
conference contribution
posted on 2010-01-01, 00:00authored byTerry 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