Exchange Rate Changes and the Operating Performance of Multinationals

European Financial Management, Forthcoming

38 Pages Posted: 1 Jul 2008 Last revised: 12 Aug 2009

See all articles by Bong-Soo Lee

Bong-Soo Lee

Florida State University

Jungwon Suh

Sungkyunkwan University (SKKU)

Date Written: August 10, 2009

Abstract

Using a sample of 261 U.S. multinationals over the period 1984 to 2002, we examine the relation between exchange rate changes and the profitability of foreign operations. We find that the impact of exchange rate changes on foreign operations' profitability is not statistically significant in the majority of industries. Furthermore, according to our variance components analysis, exchange rate changes explain less than two percent of the variation in foreign operations' profitability for most industries. We also find that the impact of exchange rate changes on foreign operations' profitability is generally weak for non-U.S. multinationals from Australia, Canada, Japan and the U.K. Our evidence is consistent with the finding of prior studies that the impact of exchange rate changes on firm value is not significant for most multinationals.

Keywords: exchange rate exposure, operating performance, multinational companies

JEL Classification: F23, F31, G32

Suggested Citation

Lee, Bong-Soo and Suh, Jungwon, Exchange Rate Changes and the Operating Performance of Multinationals (August 10, 2009). European Financial Management, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1153919

Bong-Soo Lee

Florida State University ( email )

423 Rovetta Business Building
Tallahassee, FL 32306-1110
United States
850-644-4713 (Phone)

HOME PAGE: http://www.cob.fsu.edu/fin/display_faculty_info.cfm?pID=401

Jungwon Suh (Contact Author)

Sungkyunkwan University (SKKU) ( email )

206 International Hall
Seoul 110-745, 110-745
Korea, Republic of (South Korea)

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