Get access

Does Centralisation of FX Derivative Usage Impact Firm Value?


  • The author gratefully acknowledges several valuable comments and suggestions by an anonymous referee. I furthermore wish to thank John Doukas (the editor), Raj Aggarwal, Tom Aabo, Anders Vilhelmsson, Lars Oxelheim, Jens Forssbæck, Fredrik N.G. Andersson, and Anders Löflund for helpful comments. I thank the Jan Wallander and Tom Hedelius foundation and the Tore Browaldh foundation for financial support. Any remaining errors are the responsibility of the author alone.


Previous research has shown that firms identified as derivative users tend to be valued at a premium relative to non-users. In this paper I develop the hypothesis that the ‘derivative premium’ is higher in firms with centralised FX exposure management, compared to a decentralised approach in which subsidiaries retain bank contacts and/or decision-making authority. This study benefits from unique survey data on the FX management practices and derivative usage of Swedish listed firms. The data supports the centralisation-hypothesis. Firms with a centralised approach have a statistically significant derivative premium of around 15%, whereas there is no premium for decentralised firms.