The Impact of Currency Risk on US MNCs: Evidence from Currency Crises

59 Pages Posted: 6 Jan 2012 Last revised: 1 Oct 2012

See all articles by Kathryn L. Dewenter

Kathryn L. Dewenter

University of Washington - Michael G. Foster School of Business

Catherine M. Schrand

University of Pennsylvania - Accounting Department

Clare Wang

University of Colorado at Boulder - Leeds School of Business

Date Written: December 1, 2011

Abstract

When countries shift from a fixed to a floating currency regime, the change in currency risk for a US MNC is larger for currencies tied to the dollar during the fixed regime than for non-dollar-linked currencies. Our analysis exploits this difference in changes in currency risk around regime shifts to provide new evidence on currency exposure and the impact of currency risk on cross-border investment decisions. We conclude that the net exposure to currency risk is significant for US MNCs. However, factors other than currency risk such as strategic considerations are of first-order importance for firms' cross-border investment decisions.

Keywords: Currency risk, currency exposure, cross-border investment

JEL Classification: F21, G34

Suggested Citation

Dewenter, Kathryn L. and Schrand, Catherine M. and Wang, Clare, The Impact of Currency Risk on US MNCs: Evidence from Currency Crises (December 1, 2011). Available at SSRN: https://ssrn.com/abstract=1980859 or http://dx.doi.org/10.2139/ssrn.1980859

Kathryn L. Dewenter (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Dept. of Finance & Business Economics
Seattle, WA 98195-3200
United States
206-685-7893 (Phone)
206-685-9392 (Fax)

Catherine M. Schrand

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-898-6798 (Phone)
215-573-2054 (Fax)

Clare Wang

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
301
Abstract Views
2,036
rank
126,623
PlumX Metrics