Exchange Rate Changes and the Operating Performance of Multinationals

29 Pages Posted: 31 Dec 2011

See all articles by Bong‐Soo Lee

Bong‐Soo Lee

Florida State University

Jungwon Suh

Sungkyunkwan University (SKKU)

Date Written: January 2012

Abstract

Using a sample of 261 US multinationals over the period 1984–2002, 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 2% 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‐US multinationals from Australia, Canada, Japan and the UK. 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 (January 2012). European Financial Management, Vol. 18, Issue 1, pp. 88-116, 2012. Available at SSRN: https://ssrn.com/abstract=1977736 or http://dx.doi.org/10.1111/j.1468-036X.2009.00522.x

Bong Soo Lee (Contact Author)

Florida State University ( email )

Tallahasse, FL 32306
United States

Jungwon Suh

Sungkyunkwan University (SKKU) ( email )

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

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