An investigation of the use of foreign exchange rate risk management tools in practice

Abstract

This study investigates the use of foreign exchange rate risk management tools in practice. Aiming to determine the best practices of foreign exchange risk management used by companies, determine the most common foreign exchange risk management tools used by companies, and explore the impact of firm size and country of origin on the degree of the use of foreign exchange rate management instruments. To accomplish our objectives, we analyzed 14 empirical studies conducted by other researchers focused on foreign exchange risk management using context analysis. In addition, by taking a sample consisting of 27 multinational companies, we performed an empirical study of the foreign exchange risk management tools employed by UK, French, and German multinational companies using descriptive statistics and regression analyses. The data was collected using a combination of quantitative and qualitative information obtained from secondary sources, including annual reports, financial statements, and previous research studies.