Exchange Rate Changes and the Operating Performance of Multinationals
European Financial Management, Forthcoming
38 Pages Posted: 1 Jul 2008 Last revised: 12 Aug 2009
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: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Risk Management: Coordinating Corporate Investment and Financing Policies
By Kenneth Froot, David S. Scharfstein, ...
-
Why Firms Use Currency Derivatives
By Christopher Geczy, Bernadette A. Minton, ...
-
The Use of Foreign Currency Derivatives and Firm Market Value
-
Exchange Rate Exposure, Hedging, and the Use of Foreign Currency Derivatives
-
Do Firms Hedge in Response to Tax Incentives?
By John R. Graham and Daniel A. Rogers
-
How Much Do Firms Hedge with Derivatives?
By Wayne R. Guay and S.p. Kothari
-
How Much Do Firms Hedge with Derivatives?
By Wayne R. Guay and S.p. Kothari
-
By John M. Griffin and René M. Stulz