Eurozone Exit Risk
39 Pages Posted: 3 Jun 2017 Last revised: 21 Sep 2018
Date Written: September 4, 2018
We introduce a novel indicator of eurozone exit risk based on American Depositary Receipts (ADRs). We exploit ADR investors’ exposure to potential losses associated with a eurozone exit, e.g. due to redenomination of underlying stocks into the new devaluated currency, capital controls or trading halts. We are the first to analyze the effects of eurozone exit risk on banks and non-financial firms. European banks are negatively affected by exit risk of Greece, Italy and Spain, channeled through bilateral credit risk. Non-financial firms from GIIPS countries respond negatively to domestic exit risk, while larger corporate cash holdings reduce this exposure.
Keywords: Eurozone Exit Risk; American Depositary Receipts; Exposure of banks and non-financial companies
JEL Classification: F31, F32, G01, G12, G15
Suggested Citation: Suggested Citation