The determinants of the foreign currency hedging strategies

Abstract

This paper examines the factors determining the selection of currency hedging strategies
using a sample of non-financial French firms. It is the first study investigating
the financial characteristics of firms that determine the choice of foreign currency
hedging strategies, namely not using financial instruments, using only one hedging
technique or combining derivatives and foreign currency debt. Results show that the
size of the company, the percentage of foreign sales, and the leverage are the main
factors determining the implementation of a hedging strategy based upon derivatives
and/or foreign currency debt.