European Journal of Business Science and Technology 2020, 6(1):53-65 | DOI: 10.11118/ejobsat.2020.002

An Empirical Analysis of the Currency Hedging Behavior of North German SMEs

Jan Christoph Neumann1
1 Mendel University in Brno, Czech Republic

In a globalized world, companies are able to sell their products or services abroad or purchase them abroad. This generates advantages due to the expansion of the business area creating a broader market but comes along with currency risks. This paper examines which factors influence German SMEs’ willingness to conduct foreign business, respectively to do transactions in foreign currencies. An empirical study researches how the currency risk in North German SMEs is valued and assessed. The analysis further identifies the differences in the use of foreign currencies of rural and urban SMEs and examines the reasons for the use of foreign currencies and currency management which lead to the use of currency hedging. With a sample size of 73 SMEs the study aims for a better understanding of the foreign activities of German SMEs and investigates the approach to the currency risk management for a better understanding of their needs. In general, the paper shows that the larger a company is, the more likely is the use of a currency management. A comparison of rural and urban SMEs in Northern Germany reveals, that urban ones are larger and therefore more likely to use currency hedging. Based on the research, the paper provides recommendations for SMEs with foreign sales.

Keywords: currency hedging, currency management, importers, exporters, currency volatility, North German SMEs
JEL classification: A10, G30, G40

Received: August 5, 2020; Accepted: August 10, 2020; Published: August 31, 2020  Show citation

ACS AIP APA ASA Harvard Chicago IEEE ISO690 MLA NLM Turabian Vancouver
Neumann, J.C. (2020). An Empirical Analysis of the Currency Hedging Behavior of North German SMEs. European Journal of Business Science and Technology6(1), 53-65. doi: 10.11118/ejobsat.2020.002
Download citation

References

  1. ARNOLD, M. M., RATHGEBER, A. W., & STÖCKL, S. (2014). Determinants of corporate hedging: A (statistical) meta-analysis. The Quarterly Review of Economics and Finance, 54(4): 443-458. Go to original source...
  2. BANTEL, K.A. AND JACKSON, S.E. (1989). Top management and innovations in banking: does the composition of the top team make a difference?. Strategic management journal, 10(S1): 107-124. Go to original source...
  3. BISHEV, G., & BOSKOV, T. (2016). Financial impact strategy on SMEs in the business world. International Journal of Current Research, 8(9): 39226-39229.
  4. BOONE, H. N., & BOONE, D. A. 2012. Analyzing Likert data. Journal of extension, 50(2): 1-5.
  5. ÈADEK, V., ROTTOVÁ, H., & SAXA, B. (2011). Hedging Behaviour of Czech Exporting Firms. Czech National Bank Working Paper Series 14.
  6. DAVIES, D., ECKBERG, C., & MARSHALL, A. (2006). The determinants of Norwegian exporters' foreign exchange risk management. European Journal of Finance, 12(03): 217-240. Go to original source...
  7. DREGER, C., KHOLODILIN, K. A., ULBRICHT, D., & FIDRMUC, J. (2016). Between the hammer and the anvil: The impact of economic sanctions and oil prices on Russia's ruble. Journal of Comparative Economics, 44(2): 295-308. Go to original source...
  8. FALKNER, E. M., & HIEBL, M. R. (2015). Risk management in SMEs: a systematic review of available evidence. The Journal of Risk Finance, 16(2): 122-144. Go to original source...
  9. GEYER-KLINGEBERG, J., HANG, M., RATHGEBER, A. W., STÖCKL, S., & WALTER, M. (2018). What do we really know about corporate hedging? A meta-analytical study. Business Research, 11(1): 1-31. Go to original source...
  10. GURKOV, I., & SAIDOV, Z. (2017). Current strategic actions of Russian manufacturing subsidiaries of Western multinational corporations. Journal of East-West Business, 23(2): 171-193. Go to original source...
  11. HANG, M., GEYER-KLINGEBERG, J., RATHGEBER, A., & STOECKL, S. (2017). If, when, and how financial decisions affect firm value: a meta-analysis. SSRN Electronic Journal, 1(8): 7-45. Go to original source...
  12. KARÁSEK, P., STEJSKALOVÁ, D. AND ULÈÁK, Z., (2014). Analysis of rural social aspects in the context of land consolidations and land use planning, the case study, Czech Republic. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 62(3): 507-515. Go to original source...
  13. KHEDIRI, K. B., & FOLUS, D. (2010). Does hedging increase firm value? Evidence from French firms. Applied Economics Letters, 17(10): 995-998. Go to original source...
  14. MCCARTHY, S. (1999). Foreign exchange transaction exposure management practices of Australian SMEs: an exploratory analysis. Small Enterprise Research, 7(2): 29-42. Go to original source...
  15. MEISTER, S. (2014). Reframing Germany's Russia Policy: An Opportunity for the EU. European Council on Foreign Relations (ECFR).
  16. MOSER, C., NESTMANN, T., & WEDOW, M. (2008). Political risk and export promotion: evidence from Germany. World Economy, 31(6): 781-803. Go to original source...
  17. PAQUÉ, K.-H. (2009). Vierteljahrshefte zur Wirtschaftsforschung. Duncker & Humblot, 78 (2): 63-77. Go to original source...
  18. PORTANSKIY A. (2014). Antirossiyskie sankcii - meru destruktivnye i kontrproduktivnye [Russian sanctions - destructive and contraproductive measures]. Money and Credit, (10): 8-10.
  19. RAUCH, A., & FRESE, M. (2007). Let's put the person back into entrepreneurship research: A meta-analysis on the relationship between business owners' personality traits, business creation, and success. European Journal of work and organizational psychology, 16(4): 353-385. Go to original source...
  20. SANDERS, W.G. AND CARPENTER, M.A., (1998). Internationalization and firm governance: The roles of CEO compensation, top team composition, and board structure. Academy of Management journal, 41(2): 158-178. Go to original source...
  21. SINN, H. W. (2006). The pathological export boom and the bazaar effect: how to solve the German puzzle. World Economy, 29(9): 1157-1175. Go to original source...
  22. SOIN, K., & COLLIER, P. (2013). Risk and risk management in management accounting and control, Management Accounting Research, 24(2): 82-87. Go to original source...
  23. STATISTIK-NORD (2020). Eckzahlen Unternehmen. Statistische Amt für Hamburg und Schleswig-Holstein - Anstalt des öffentlichen Rechts.
  24. STRAKA, J. AND TUZOVÁ, M. (2016). Factors affecting development of rural areas in the Czech Republic: A literature review. Procedia-Social and Behavioral Sciences, 220: 496-505. Go to original source...
  25. YIANNAKI, S. (2012). A systemic risk management model for SMEs under financial crisis. International Journal of Organizational Analysis, 20(4): 406-422. Go to original source...

This is an open access article distributed under the terms of the Creative Commons Attribution-ShareAlike 4.0 International License (CC BY-SA 4.0), which permits use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.