Exchange Rate Risk Exposure and the Value of European Firms

Fabio Parlapiano, Vitali Alexeev & Mardi Dungey (2017) Exchange rate risk exposure and the value of European firms, The European Journal of Finance, 23:2, 111-129

31 Pages Posted: 12 Aug 2019

See all articles by Fabio Parlapiano

Fabio Parlapiano

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

Vitali Alexeev

University of Technology Sydney

Mardi H. Dungey

University of Tasmania (deceased); Financial Research Network (FIRN) (deceased)

Date Written: January 5, 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 H., Exchange Rate Risk Exposure and the Value of European Firms (January 5, 2015). Fabio Parlapiano, Vitali Alexeev & Mardi Dungey (2017) Exchange rate risk exposure and the value of European firms, The European Journal of Finance, 23:2, 111-129, Available at SSRN: https://ssrn.com/abstract=3434357

Fabio Parlapiano

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 (Contact Author)

University of Technology Sydney ( email )

UTS Business School
PO Box 123, Broadway
Sydney, NSW
Australia

HOME PAGE: http://valexeev.yolasite.com

Mardi H. Dungey

University of Tasmania (deceased)

Financial Research Network (FIRN) (deceased)

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