Foreign Exchange exposure, corporate financial policies and the exchange rate regime: Evidence from Brazil

Abstract Recent financial crises showed that emerging countries are extremely vulnerable to sudden swings in international capital flows. In these countries, commonly, periods of relative tranquility, characterized by substantial capital inflows and real GDP growth, are followed by periods when capital flows abroad, and output plummets . In some countries, such crises led not only to economic downturns but also to social unrest. Although there is a consensus among economists that emerging markets should take measures to reduce their external vulnerability, there is no agreement about the role of the choice of the exchange rate regime in this matter. At the center of this debate is the fact that due to the widespread problem of the dollarization of liabilities, depreciations of the home currency in emerging markets would cause a collapse in companies’ balance sheets, leading to a fall in output . Therefore, one mechanism through which the choice of the exchange rate regime could affect countries’ vulnerability would be to exert influence on corporate financial policies. One hypothesis in the international finance literature is that fixed exchange rate regimes would increase countries’ vulnerability by leading companies to disregard the exchange rate risk, biasing their borrowing towards foreign currency denominated debt , and/or reducing their hedging activities. According to this hypothesis, floating regimes would help to reduce countries’ vulnerability by inducing creditors and debtors to take seriously their exchange rate exposure. On the other hand, the so-called ‘original sin’ theory argues that, independently of the exchange rate regime, emerging countries will always be vulnerable to external shocks. There will always be a currency mismatch on companies’ balance sheets, since domestic companies would never be allowed to borrow in the domestic currency, and most of their revenues come from domestic activities. Since the theoretical literature has not reached a consensus, at the end of the day, the answer for this question should be empirical, as pointed out by Eichengreen and Hausmann (1999), ''...gathering survey (and other) data on hedged and unhedged exposures and analyzing their determinants should be a high priority for academics'' . This paper tries to shed light on this question by analyzing the behavior of foreign currency exposure for a sample of non-financial Brazilian companies from 1996 to 2002. This includes a period under a fixed exchange rate regime (1996-1998), and a period under a floating regime (1999-2002). I analyze whether companies’ exposure varies with the choice of the exchange rate regime. Moreover, I discriminate among the several determinants of companies’ exchange rate exposure, and finally I study the relationship among corporate financial policies, the choice of the exchange rate regime, and the exchange rate exposure. Brazil provides a perfect natural experiment for analyzing the relationship between foreign currency exposure and the choice of exchange rate regime in emerging markets. Brazil is one of the largest emerging markets economies, and had a fixed exchange rate regime from 1995 to January 1999. After that the currency was allowed to float freely, currency derivatives were available in both periods and companies kept substantial levels of foreign currency denominated debt. Finally, I know of no studies combining analysis of the exposure of companies, the determinants of that exposure and the role of the exchange rate regime in an emerging market economy in which fluctuations in the exchange rate and risk management policies are of major importance to the real economy. The main results can be summarized as follows. Fluctuations in the exchange rate are indeed problematic for emerging markets like Brazil; about 40% of Brazilian companies are exposed to changes in the exchange rate, and, unlike those in the US, Brazilian companies do not on average benefit from devaluations of the home currency. A 1% change in the exchange rate leads to a 0.22% fall in the average company’s stock market returns. This paper also shows that the floating exchange rate regime has been able to reduce such exposure. Under the fixed exchange rate regime about 60% of the companies are exposed to fluctuations on the real exchange rate; this proportion drops to 23% under the floating exchange rate regime. The results confirm that the high proportion of foreign currency denominated debt to total debt is the main source of risk for Brazilian companies, and that foreign sales and hedging activities are able to mitigate the negative exposure that comes from the impact of the fluctuations of the exchange rate on companies’ foreign liabilities. This paper also associates the reduction in the number of companies exposed to changes in the exchange rate with an improvement in companies’ risk management activities associated with the change of the exchange rate regime. Under the floating regime, not only do more companies hedge their exchange rate exposure, but these firms also hedge a larger proportion of their foreign currency denominated debt. Following the optimal hedging literature, I find that companies’ hedging activities are linked to the attempt to reduce their foreign currency exposure. Companies with higher ratio of foreign debt to total debt are more likely to use currency derivatives. Moreover, using a model developed by Holmstrom and Tirole (1997), and extended by Martinez and Werner (2003), I find that the fixed exchange rate regime induced companies to incur mismatches in their balance sheets, whereas the floating regime has been able to reduce such mismatches by leading companies to take seriously their exposure to fluctuations in the exchange rate.Exchange rate regime, hedging, exposure, debt composition

Identification of heavy-flavour jets with the CMS detector in pp collisions at 13 TeV

Many measurements and searches for physics beyond the standard model at the LHC rely on the efficient identification of heavy-flavour jets, i.e. jets originating from bottom or charm quarks. In this paper, the discriminating variables and the algorithms used for heavy-flavour jet identification during the first years of operation of the CMS experiment in proton-proton collisions at a centre-of-mass energy of 13 TeV, are presented. Heavy-flavour jet identification algorithms have been improved compared to those used previously at centre-of-mass energies of 7 and 8 TeV. For jets with transverse momenta in the range expected in simulated $\mathrm{t}\overline{\mathrm{t}}$ events, these new developments result in an efficiency of 68% for the correct identification of a b jet for a probability of 1% of misidentifying a light-flavour jet. The improvement in relative efficiency at this misidentification probability is about 15%, compared to previous CMS algorithms. In addition, for the first time algorithms have been developed to identify jets containing two b hadrons in Lorentz-boosted event topologies, as well as to tag c jets. The large data sample recorded in 2016 at a centre-of-mass energy of 13 TeV has also allowed the development of new methods to measure the efficiency and misidentification probability of heavy-flavour jet identification algorithms. The heavy-flavour jet identification efficiency is measured with a precision of a few per cent at moderate jet transverse momenta (between 30 and 300 GeV) and about 5% at the highest jet transverse momenta (between 500 and 1000 GeV)

Evidence for the Higgs boson decay to a bottom quark–antiquark pair

info:eu-repo/semantics/publishe

Search for heavy resonances decaying to a top quark and a bottom quark in the lepton+jets final state in proton–proton collisions at 13 TeV

info:eu-repo/semantics/publishe

Penilaian Kinerja Keuangan Koperasi di Kabupaten Pelalawan

This paper describe development and financial performance of cooperative in District Pelalawan among 2007 - 2008. Studies on primary and secondary cooperative in 12 sub-districts. Method in this stady use performance measuring of productivity, efficiency, growth, liquidity, and solvability of cooperative. Productivity of cooperative in Pelalawan was highly but efficiency still low. Profit and income were highly, even liquidity of cooperative very high, and solvability was good

Juxtaposing BTE and ATE – on the role of the European insurance industry in funding civil litigation

One of the ways in which legal services are financed, and indeed shaped, is through private insurance arrangement. Two contrasting types of legal expenses insurance contracts (LEI) seem to dominate in Europe: before the event (BTE) and after the event (ATE) legal expenses insurance. Notwithstanding institutional differences between different legal systems, BTE and ATE insurance arrangements may be instrumental if government policy is geared towards strengthening a market-oriented system of financing access to justice for individuals and business. At the same time, emphasizing the role of a private industry as a keeper of the gates to justice raises issues of accountability and transparency, not readily reconcilable with demands of competition. Moreover, multiple actors (clients, lawyers, courts, insurers) are involved, causing behavioural dynamics which are not easily predicted or influenced. Against this background, this paper looks into BTE and ATE arrangements by analysing the particularities of BTE and ATE arrangements currently available in some European jurisdictions and by painting a picture of their respective markets and legal contexts. This allows for some reflection on the performance of BTE and ATE providers as both financiers and keepers. Two issues emerge from the analysis that are worthy of some further reflection. Firstly, there is the problematic long-term sustainability of some ATE products. Secondly, the challenges faced by policymakers that would like to nudge consumers into voluntarily taking out BTE LEI

Search for stop and higgsino production using diphoton Higgs boson decays

Results are presented of a search for a "natural" supersymmetry scenario with gauge mediated symmetry breaking. It is assumed that only the supersymmetric partners of the top-quark (stop) and the Higgs boson (higgsino) are accessible. Events are examined in which there are two photons forming a Higgs boson candidate, and at least two b-quark jets. In 19.7 inverse femtobarns of proton-proton collision data at sqrt(s) = 8 TeV, recorded in the CMS experiment, no evidence of a signal is found and lower limits at the 95% confidence level are set, excluding the stop mass below 360 to 410 GeV, depending on the higgsino mass

Differential cross section measurements for the production of a W boson in association with jets in proton–proton collisions at √s = 7 TeV

Measurements are reported of differential cross sections for the production of a W boson, which decays into a muon and a neutrino, in association with jets, as a function of several variables, including the transverse momenta (pT) and pseudorapidities of the four leading jets, the scalar sum of jet transverse momenta (HT), and the difference in azimuthal angle between the directions of each jet and the muon. The data sample of pp collisions at a centre-of-mass energy of 7 TeV was collected with the CMS detector at the LHC and corresponds to an integrated luminosity of 5.0 fb[superscript −1]. The measured cross sections are compared to predictions from Monte Carlo generators, MadGraph + pythia and sherpa, and to next-to-leading-order calculations from BlackHat + sherpa. The differential cross sections are found to be in agreement with the predictions, apart from the pT distributions of the leading jets at high pT values, the distributions of the HT at high-HT and low jet multiplicity, and the distribution of the difference in azimuthal angle between the leading jet and the muon at low values.United States. Dept. of EnergyNational Science Foundation (U.S.)Alfred P. Sloan Foundatio

Severe early onset preeclampsia: short and long term clinical, psychosocial and biochemical aspects

Preeclampsia is a pregnancy specific disorder commonly defined as de novo hypertension and proteinuria after 20 weeks gestational age. It occurs in approximately 3-5% of pregnancies and it is still a major cause of both foetal and maternal morbidity and mortality worldwide1. As extensive research has not yet elucidated the aetiology of preeclampsia, there are no rational preventive or therapeutic interventions available. The only rational treatment is delivery, which benefits the mother but is not in the interest of the foetus, if remote from term. Early onset preeclampsia (<32 weeks’ gestational age) occurs in less than 1% of pregnancies. It is, however often associated with maternal morbidity as the risk of progression to severe maternal disease is inversely related with gestational age at onset2. Resulting prematurity is therefore the main cause of neonatal mortality and morbidity in patients with severe preeclampsia3. Although the discussion is ongoing, perinatal survival is suggested to be increased in patients with preterm preeclampsia by expectant, non-interventional management. This temporising treatment option to lengthen pregnancy includes the use of antihypertensive medication to control hypertension, magnesium sulphate to prevent eclampsia and corticosteroids to enhance foetal lung maturity4. With optimal maternal haemodynamic status and reassuring foetal condition this results on average in an extension of 2 weeks. Prolongation of these pregnancies is a great challenge for clinicians to balance between potential maternal risks on one the eve hand and possible foetal benefits on the other. Clinical controversies regarding prolongation of preterm preeclamptic pregnancies still exist – also taking into account that preeclampsia is the leading cause of maternal mortality in the Netherlands5 - a debate which is even more pronounced in very preterm pregnancies with questionable foetal viability6-9. Do maternal risks of prolongation of these very early pregnancies outweigh the chances of neonatal survival? Counselling of women with very early onset preeclampsia not only comprises of knowledge of the outcome of those particular pregnancies, but also knowledge of outcomes of future pregnancies of these women is of major clinical importance. This thesis opens with a review of the literature on identifiable risk factors of preeclampsia