Exchange Rate Risk and Corporate Hedging: Evidence from Turkey

Buyukkara G., KARAN M. B., TEMİZ H., YILDIZ Y.

EMERGING MARKETS FINANCE AND TRADE, vol.55, no.8, pp.1737-1753, 2019 (SSCI) identifier identifier


The aim of this study is to investigate the effect of exchange rate risk on corporate hedging in Turkey. Our panel logit analysis for the period 2009-2015 favors the financial distress hypothesis of hedging rather than the agency cost or investment opportunities hypotheses. The US dollar exchange rate affects the likelihood of currency risk hedging more than the conventional firm-specific determinants of corporate hedging especially after the Fed tapering period. Our findings reveal that, as the dollar exchange rate rises, firms increase their hedging activity since they carry considerable amount of debt in dollars, particularly aftermath of the global financial crisis.