Use of currency hedging instruments by non-financial Turkish firms
Author
Akay, Mustafa
Advisor
Önder, Zeynep
Date
2018-09Publisher
Bilkent University
Language
English
Type
ThesisItem Usage Stats
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Abstract
Having significant exchange rate exposure, Turkish non-financial firms face both
operational and financial risk caused by exchange rate movements. Despite not being
as deep as in the developed countries, Turkish financial markets offer currency hedge
instruments. Although Turkish firms have option for hedging against currency risk, it
is observed that use of those instruments is not common for Turkish firms. This
thesis aims to examine firm specific factors that affect the use of hedging instruments
as well as the degree of hedging. A sample of 178 Turkish non-financial firms listed
in Borsa Istanbul is examined for the period between 2007 and 2017. The use of
currency derivatives is considered appropriate representation of hedging tendency for
Turkish firms, as FX positions of firms arise from derivative contracts are reported
accurately in disclosures of financial reports. It is found that firm size and leverage have a positive effect on the probability of using currency derivatives whereas fixed
asset ratio has negative effect. Moreover, liquidity buffer as a substitute for
derivative usage is found to reduce the degree of hedging.