Cash and Foreign Exchange Management: Theory and Corporate Practice In Three Countries

Soenen, Luc; Aggarwal, Raj

doi:10.1111/j.1468-5957.1989.tb00041.x

Cited by 21 publications

(5 citation statements)

References 40 publications

(28 reference statements)

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“…Mathur (1985a) shows that for the majority of the firms in his sample, forecasting effort was directed mainly at those currencies in which firms had exposures. While Soenen and Arggarwal (1989) indicate that forecasting effort is directed primarily at the direction of FX rate change, the firms in their sample also predicted the magnitude of those changes. The relative inflation rate was the most commonly used macroeconomic variable for forecasting FX rate changes (Jilling, 1977(Jilling, , 1978.…”

Section: Literature Reviewmentioning

confidence: 89%

The Foreign Exchange Exposure Management Practices of Finnish Industrial Firms

Hakkarainen¹,

Joseph

Kasanen³

et al. 1998

Financ Manag Account

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This study employs questionnaire survey and financial accounting data to extend earlier empirical work on the foreign exchange (FX) exposure management practices of Finnish industrial firms. The paper concentrates on: (i) the form that FX corporate hedging policy takes; (ii) the control of FX procedures and trading; and, (iii) our respondents' perceptions about their ability to predict FX rate changes for hedging decisions. Our results indicate that the extent to which firms hedge FX exposure depends on the type of exposure and the form that FX hedging policy takes. Also, a significant number of the firms pursue FX hedging strategies on the expectation of attaining trading profits and this strategy appears to be accommodated within their FX policies. This feature is not explicitly demonstrated in previous studies. Finnish firms hedge a much higher proportion of both transaction and translation exposures compared to economic exposure. We partly attribute this emphasis to the requirements of the Finnish Accounting Act, which came into effect in 1993. The organisational, historical and financial settings of the firms also have significant impacts on exposure management practices. The overall implication of those results is that firms respond to changes in the financial, economic and regulatory environments in which they operate.

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Section: Literature Reviewmentioning

confidence: 89%

The Foreign Exchange Exposure Management Practices of Finnish Industrial Firms

Hakkarainen¹,

Joseph

Kasanen³

et al. 1998

Financ Manag Account

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“…As one respondent said, "there are no reliable methods of forecasting other than for the very short term." Similarly, in the "others" category some respondents, especially UK MNCs, said they do not forecast exchange rates movements, although some of the alternative answers include using market and forward rates, 12 previous year-end rates, Reuters and other forecasting publications, and group committees (Mathur, 1985), although Soenen and Arggarwal (1989) indicate that the direction of foreign exchange rate change is what is important, and the companies in their sample predicted the magnitude of those changes. 11 This is similar to the survey of 23 UK and U.S. multinational companies, by Davis et al (1991) who argued: "the most widely used method was external agencies such as banks, Reuters, Telerate, Computerate, etc., combined with internal judgement to arrive at a consensus qualitative view."…”

Section: Tools In the Practice Of Risk Managementmentioning

confidence: 99%

The Practice of Financial Risk Management: An International Comparison

Lee

Marshall

Szto³

et al. 2001

Thunderbird Intl Bus Rev

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Executive SummaryThe objective of this article is to simultaneously survey the practice of risk management of large United Kingdom, United States, and Asia Pacific multinational companies (MNCs). We investigate whether risk management practices vary internationally. From 179 (30%) usable responses we find a number of interregional differences in the organization of risk management; a greater emphasis on decentralized structures in the Asia Pacific and less formal board control over risk management in U.S. MNCs. In terms of the tools of risk management there were differences internationally in the concerns in choosing derivatives, driven to some extent by differences in the accounting treatment internationally. In general, the size, degree of internationalization and industry sector of the respondent MNCs could not explain these regional differences. However, there was little variation in the methods of forecasting exchange rates and the majority of MNCs in all regions use a centralized risk management system.

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“…This was often still rather done per local entity, business unit and at best country level than that integrated corporate cash management concepts were employed (cf. Soenen, Aggarwal 1989).…”

Section: Centralisation Over Timementioning

confidence: 99%

Cash management organisation decision-making: economics, strategy and operations

Westerman

2020

CEREM

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Abstract: Aim: This article starts from the observations of two cash management experts, who witness varying company views on the almost-vanished issue of structuring the internal decision-making on the organisation of it. The aim of this article is to put the current challenging developments in a digitalizing world into a conceptual perspective. Research design: The article singles out motives for either centralization or decentralization of cash management, models to organize cash management functions, as well as developments in the field over the last some thirty years. Various theoretical views are studied briefly in order to find a way out of the signalled paradox. Findings: It can be concluded that multiple practices may coexist both within and between firms, whereby a refined understanding in terms of financial economics, strategic direction and operational flexibility is called for. Originality: The present study is unique in that it is among the first to signal the return of the centralisation versus decentralisation issue in cash management in a rapidly evolving digital era and multi-legislation world. Implications: The developments offer a unique opportunity for firms, further reducing their costs, to overthink their cash management system, including its relation to the external world. The study calls for follow-up research in terms of case studies at organisations with varying contingencies and survey questionnaires among representative samples. Keywords: cash management organisation, (de-) centralisation, decision-making JEL: B27, G30, L23

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Cash and Foreign Exchange Management: Theory and Corporate Practice In Three Countries

Cited by 21 publications

References 40 publications

The Foreign Exchange Exposure Management Practices of Finnish Industrial Firms

The Foreign Exchange Exposure Management Practices of Finnish Industrial Firms

The Practice of Financial Risk Management: An International Comparison

Cash management organisation decision-making: economics, strategy and operations

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