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Corporate Cash Flow and Stock Price Exposures to Foreign Exchange Rate Risk

Journal of Corporate Finance, Vol. 13, No. 5, pp. 981-994, December 2007

26 Pages Posted: 10 May 2007 Last revised: 10 Mar 2014

Söhnke M. Bartram

Warwick Business School - Department of Finance

Date Written: May 1, 2007

Abstract

This paper estimates the foreign exchange rate exposure of 6,917 U.S. nonfinancial firms on the basis of stock prices and corporate cash flows. The results show that several firms are significantly exposed to at least one of the foreign exchange rates Canadian Dollar, Japanese Yen and Euro, and significant exposures are more frequent at longer horizons. The percentage of firms for which stock price and earnings exposures are significantly different is relatively low, though it increases with time horizon. Overall, the impact of exchange rate risk on stock prices and cash flows is similar and determined by a related set of economic factors.

Keywords: corporate finance, risk management, exposure, foreign exchange rates, hedging

JEL Classification: G3, F4, F3

Suggested Citation

Bartram, Söhnke M., Corporate Cash Flow and Stock Price Exposures to Foreign Exchange Rate Risk (May 1, 2007). Journal of Corporate Finance, Vol. 13, No. 5, pp. 981-994, December 2007. Available at SSRN: https://ssrn.com/abstract=985413 or http://dx.doi.org/10.2139/ssrn.985413

Söhnke M. Bartram (Contact Author)

Warwick Business School - Department of Finance ( email )

Coventry, CV4 7AL
United Kingdom
+44 (24) 7657 4168 (Phone)
+1 425 952 1070 (Fax)

HOME PAGE: http://go.warwick.ac.uk/sbartram/

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