An integrated model of multinational flexibility and financial hedging

Abstract

We construct a model of a multinational firm with flexibility in sourcing its production and with the ability to use financial markets to hedge exchange rate risk. Agency costs generated by the firm's capital structure create a link between the firm's financial policy and its production decisions. The firm's need for hedging is directly related to the degree of flexibility, and the production plan it chooses is a function of the hedging strategy it employs. Consequently, the firm's ability to exploit its competitive position depends upon the degree to which its flexibility is matched by the construction of an appropriate hedging strategy.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 156 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.