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

See all articles by Sungbin Cho

Sungbin Cho

Korea Development Institute (KDI)

Min-Kyu Song

Korea Institute of Finance

Date Written: March 15, 2011

Abstract

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

Cho, Sungbin and Song, Min-Kyu, Foreign Exchange Exposures of Korean Firms (March 15, 2011). Journal of East Asian Economic Integration, Vol. 15, No. 1, Spring 2011, Available at SSRN: https://ssrn.com/abstract=2318313 or http://dx.doi.org/10.2139/ssrn.2318313

Sungbin Cho (Contact Author)

Korea Development Institute (KDI) ( email )

263 Namsejong-ro
Sejong-si 30149
Korea, Republic of (South Korea)

Min-Kyu Song

Korea Institute of Finance ( email )

4-1 Myung-dong 1-ga
Seoul 100-021
United States

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