The Asian Exposure of U.S. Firms: Operational and Risk Management Strategies

18 Pages Posted: 21 Oct 2003

See all articles by Yong-Cheol Kim

Yong-Cheol Kim

University of Wisconsin-Milwaukee

Jongmoo Jay Choi

Temple University; National Bureau of Economic Research (NBER); Temple University - International Business

Multiple version iconThere are 2 versions of this paper

Abstract

This paper examines the Asian currency exposure of US firms with regard to their international operational and risk management strategies. We find that contemporaneous and lagged changes in real exchange rates have significant impacts on firm value for about 30% of the US firms with Asian operations. The effects of a strong dollar are heterogeneous, with both significantly positive and negative coefficients. The exchange exposure coefficients are then estimated as a function of international operational and risk management variables. A strong dollar has an adverse effect on firm value when the firm has a negative initial exposure position, and is related to exports and local sales activities of the firm. However, asset deployment in Asia raises the exposure in absolute terms regardless of initial exposure condition. Variables for hedging incentives explain exposure in both positive and negative exposure cases. Finally, a disaggregate study by country shows significant intra-regional differences, indicating the different ways in which the US firms used their Asian subsidiaries operationally.

Keywords: Exchange exposure, international operational strategy, corporate risk management, Asian currencies, American firms in Asia

JEL Classification: G3, F23, F31

Suggested Citation

Kim, Yong-Cheol and Choi, Jongmoo Jay, The Asian Exposure of U.S. Firms: Operational and Risk Management Strategies. Available at SSRN: https://ssrn.com/abstract=421762 or http://dx.doi.org/10.2139/ssrn.421762

Yong-Cheol Kim

University of Wisconsin-Milwaukee ( email )

School of Business Administration
P.O. Box 742
Milwaukee, WI 53201-0742
United States
414-229-4997 (Phone)
414-229-6957 (Fax)

Jongmoo Jay Choi (Contact Author)

Temple University ( email )

Fox School of Business
Temple University
Philadelphia, PA 19122
United States
215-204-5084 (Phone)
215-204-1697 (Fax)

HOME PAGE: http://astro.temple.edu/~jjchoi

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Temple University - International Business ( email )

Philadelphia, PA 19122
United States

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