His Pain Is Your Gain: Inter-Firm Linkages and Exchange Rate Exposure

Posted: 28 Mar 2022 Last revised: 19 Sep 2022

See all articles by Yancheng Qiu

Yancheng Qiu

Hong Kong University of Science & Technology (HKUST)

Date Written: August 28, 2022

Abstract

How do exchange rate shocks permeate the corporate sector? Using multi-country firm-level data on foreign debt and production networks, I show that foreign debt borrowers experience heightened distress when hit by adverse exchange rate shocks, but they do not propagate distress to purely domestic firms horizontally or vertically. Instead, domestic rivals and suppliers exploit the financial vulnerability of connected foreign debt borrowers and gain from an enhanced strategic advantage in competition and supplier relationships, resulting in a drop in credit risk and a rise in stock price and future profitability.

Keywords: Corporate Debt, Financial Distress, Supply Chain, Monetary Policy Shocks, Firm-Level Data

JEL Classification: F31, F34, G32, G33, L11, L14

Suggested Citation

Qiu, Yancheng, His Pain Is Your Gain: Inter-Firm Linkages and Exchange Rate Exposure (August 28, 2022). Available at SSRN: https://ssrn.com/abstract=4068806

Yancheng Qiu (Contact Author)

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

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

Paper statistics

Abstract Views
216
PlumX Metrics