Firm-Level Competition and Exchange Rate Exposure: Evidence from a Global Survey of Firms
Bergbrant, M., Campbell, K., and Hunter, D, 2014. Firm-Level Competition and Exchange Rate Exposure: Evidence from a Global Survey of Firms, in Financial Management, Forthcoming
47 Pages Posted: 11 Jun 2014
Date Written: January 23, 2014
We examine the effect of competition on exchange rate exposure using survey data from 55 countries. We find that exposure increases with the intensity of competition. Exposure is higher when firms face price competition in international and domestic product markets and when rivals compete using an unfair financial advantage. Furthermore, competition is a leading determinant of exposure, dominating the usual determinants. Exposure also increases with several determinants not previously empirically examined, such as firm-level financial constraints. These results hold for small, large, foreign-involved, and purely domestic firms. Finally, import-only firms have higher exposure than export-only firms. Our survey results are likely to capture exposure before firms’ hedging actions.
Keywords: firm-level competition, exchange rate exposure, foreign exchange risk, foreign trade, purely domestic firms, financial constraints
JEL Classification: F23, F31, G15
Suggested Citation: Suggested Citation