Firm-Level Exchange Rate Exposure in the Eurozone

International Business Review, Vol. 19, No. 5, pp. 468-478, 2010

28 Pages Posted: 18 Jan 2009 Last revised: 12 Aug 2011

See all articles by Elaine Hutson

Elaine Hutson

Monash University - Dept of Banking and Finance; Financial Research Network (FIRN)

Anthony O'Driscoll

affiliation not provided to SSRN

Date Written: February 17, 2009

Abstract

Using a sample of 1,154 European firms from 11 countries, we show that firm-level exchange exposure for Eurozone and non-Eurozone European firms has increased since the introduction of the euro, but this rise was smaller for Eurozone than non-Eurozone firms. This increase in firm-specific exposure was offset by a substantial reduction in market-level exchange exposure in most Eurozone countries, so the advent of the euro appears to have been associated with a shift in exchange risk from systematic to firm-specific. We also find that post-euro, Eurozone firms' exchange exposure is significantly greater than that of non-Eurozone European firms. This difference, however, disappears after controlling for several country-specific and firm-specific characteristics that potentially influence firms' exchange exposure.

Keywords: foreign exchange exposure, competitive exchange exposure, Eurozone, economic openness

JEL Classification: F30, G10

Suggested Citation

Hutson, Elaine and O'Driscoll, Anthony, Firm-Level Exchange Rate Exposure in the Eurozone (February 17, 2009). International Business Review, Vol. 19, No. 5, pp. 468-478, 2010, Available at SSRN: https://ssrn.com/abstract=1329364

Elaine Hutson (Contact Author)

Monash University - Dept of Banking and Finance ( email )

PO Box 197
Caulfield East, Victoria 3145
Australia
+61399032110 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Anthony O'Driscoll

affiliation not provided to SSRN ( email )

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