European Journal of Business Science and Technology 2019, 5(2):129-142 | DOI: 10.11118/ejobsat.v5i2.177

Hedging Currency Risks? An Evaluation of SMEs in Northern Germany

Jan Christoph Neumann¹

¹ Mendel University in Brno, Czech Republic

One of the important issues for companies is liquidity from domestic and foreign trade. The market is classically defined by the number of available markets. Globalization and free trade zones set up the foreign market, which becomes increasingly important - even for SMEs. This paper analyzed approx. 60,000 bank transactions with foreign reference of Northern German SMEs by using Chi-square test and correlation analysis. The analysis proofs that an increasing number of foreign transfers increases the number of foreign currency accounts per company. The results also show that despite the existence of currency hedging tools, a significant proportion of SMEs continues to expose themselves to currency risk. The willingness to manage currency risks increases with the increase in value per transaction. Transactions with a value of less than EUR 10,000 are often transferred abroad in EUR instead of in foreign currency.

Keywords: active currency management, hedging instruments, exporters, importers, currency volatility, foreign currency account, forwards, swaps

JEL classification: A10, G30, G40

Published: December 23, 2019  Show citation