Foreign Exchange Exposures of Korean Firms
Journal of East Asian Economic Integration, Vol. 15, No. 1, Spring 2011
32 Pages Posted: 31 Aug 2013 Last revised: 14 May 2016
Date Written: March 15, 2011
We measure foreign exchange exposures as sensitivity of firm’s value to FX premium in the CAPM plus FX premium model, and try to find determinants of the exposures; using data of non-financial companies listed in the Korea Exchange from the year 2007 to 2008. Main findings are as follows. If Korean won depreciates, only a small number of firms is benefited while majority of firms are harmed to the contrary of common knowledge. As a firm’s export increases, the foreign exchange exposure increases up to a certain level and after that it declines. And, smaller firms of negative foreign exchange exposures are more sensitive to foreign exchange changes. These suggest heterogeneous effects of foreign exchange rates on industries and firms.
Keywords: Foreign exchange exposure, Foreign currency premium, CAPM
JEL Classification: F21, G32, O24
Suggested Citation: Suggested Citation