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Strathprints serves world leading Open Access research by the University of Strathclyde, including research by the Strathclyde Institute of Pharmacy and Biomedical Sciences (SIPBS), where research centres such as the Industrial Biotechnology Innovation Centre (IBioIC), the Cancer Research UK Formulation Unit, SeaBioTech and the Centre for Biophotonics are based.

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The impact of the introduction of the Euro on the foreign exchange risk management in UK multinational companies

Christie, Eilidh and Marshall, Andrew (2001) The impact of the introduction of the Euro on the foreign exchange risk management in UK multinational companies. European Financial Management, 7 (3). pp. 419-434. ISSN 1354-7798

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Abstract

One of the arguments in favour of the euro is that it will eliminate foreign exchange risk for companies in the euro-zone. There could also be benefits for companies outside this zone, although their currency risk with the euro remains. This paper considers this, by examining the effect of the euro on the currency risk management of UK multinational companies (MNCs). Using the responses from a questionnaire and interviews we found that the euro, which is being widely used in UK MNCs, is generally favoured due to reductions in exchange uncertainty and costs of managing currency risk. Nonetheless, contrary to what would theoretically be expected, there was no exact relationship in the reduction in hedging activity accompanied by this reduction in risk. The majority of MNCs stated that their hedging activities would remain unchanged. The capacity of MNCs to benefit from reductions in risk and hedging depend on the proportion of non-UK European trade, the industry sector and the ability to transfer risk down the supply chain. Finally, despite the reductions in currency exposure experienced by the majority of companies the euro will not encourage UK MNCs to expand international trade.