Foreign Currency Denominated Debt as A Hedging tool for Foreign Exchange Rate Risk Exposure
Keywords:
Foreign exchange, Exposure, Risk, Hedging, Foreign debtAbstract
This study examines the foreign exchange exposure of Indian nonfinancial firms and its Foreign exchange exposure management by using foreign currency denominated debt (FDD). A sample of 86 Indian non financial firms is examined by this study for a period from 2006 to 2012. A two stage cross sectional regression frame work is used to test the main hypothesis of foreign exchange rate exposure that can be effectively hedged by FDD. The study has found statistically significant evidence that the use of FDD is effective hedging tools for reducing currency exposure of Indian nonfinancial firms.
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