| Summary: | This paper empirically examines foreign exchange (FX) hedging by UK firms to provide evidence on the determinants of a firm’s decision to hedge FX. This study provides a unique insight into the topic by employing a comparative study on the determinants of FX hedging, transaction exposure hedging and translation exposure hedging. Through a series of univariate and multivariate tests, firm size, foreign exposure and leverage are found to be the most powerful explanatory variables in a firm’s decision to hedge FX and its exposures. Moreover, an investigation into the definition of FX hedgers indicates that a more inclusive definition provides more significant, yet similar results.
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