Exchange Rate Risk Exposure and the Value of European Firms

Posted: 21 Aug 2015

See all articles by Fabio Parlapiano

Fabio Parlapiano

Bank of Italy; Sapienza, University of Rome; TSBE - Tasmanian School of Business

Vitali Alexeev

University of Tasmania; Financial Research Network (FIRN)

Mardi Dungey

University of Cambridge - Cambridge Endowment for Research in Finance (CERF)

Date Written: August 19, 2015

Abstract

This paper presents a new assessment of the exposure of European firms to exchange rate fluctuations which takes into account the potential common drivers of exchange rates and equity market conditions. Using monthly data for European firms from 1999 to 2011, we assess the impact of unexpected fluctuations in the USD, JPY, GBP and CHF against the Euro, and show that the proportion of firms subject to exchange rate risk is considerably larger when estimation accounts for potential common drivers and firm specific factors than otherwise. Firm exposure to exchange rate risk is affected by the level of international involvement, industry, firm size and country of origin. European firms with largely domestic operations reveal the greatest vulnerability to unexpected exchange rate movements, suggesting an opportunity to improve risk management for these companies.

Keywords: exchange rate risk, firm value, European firms

JEL Classification: G32, F31, F23, G15

Suggested Citation

Parlapiano, Fabio and Alexeev, Vitali and Dungey, Mardi, Exchange Rate Risk Exposure and the Value of European Firms (August 19, 2015). Available at SSRN: https://ssrn.com/abstract=2647936

Fabio Parlapiano (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

HOME PAGE: http://www.bancaditalia.it/

Sapienza, University of Rome ( email )

Via del Castro Laurenziano, 9
Rome, Rome 00161
Italy

HOME PAGE: http://https://web.uniroma1.it/dip_management/

TSBE - Tasmanian School of Business ( email )

Private Bag 84
Hobart, TAS 7001
Australia

HOME PAGE: http://www.utas.edu.au/business-and-economics/home

Vitali Alexeev

University of Tasmania ( email )

French Street
Sandy Bay
Tasmania, 7250
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Mardi Dungey

University of Cambridge - Cambridge Endowment for Research in Finance (CERF) ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

HOME PAGE: http://www.dungey.bigpondhosting.com

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

Paper statistics

Abstract Views
375
PlumX Metrics