The Use of Currency Derivatives by Brazilian Companies: An Empirical Investigation

This paper studies the use of foreign currency derivatives for a sample of non-financial Brazilian companies from 1996 to 2004. The paper verifies that some of the hypotheses presented by the optimal hedging literature are able to explain the Brazilian companies decision to use currency derivatives and their decision on the amount to use. Moreover, the paper shows that the macroeconomic environment and country-specific factors not analyzed in previous empirical work also play a role in determining the companies risk management practices and that the use of currency derivatives has an impact on the ompanies decision regarding their capital structure and the currency composition of their debt.