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A revisit to economic exposure of U.S. multinational corporations

De-Wai Chou, Lin Lin, Pi-Hsia Hung and Chun Heng Lin

The North American Journal of Economics and Finance, 2017, vol. 39, issue C, 273-287

Abstract: To shed light on the influence of U.S. major trade partners’ currencies on MNCs’ firm values, this study investigates the asymmetric effects and the determinants of appreciated and depreciated economic exposure of the U.S. MNCs. Our empirical results reveal several findings: (1) The influences of exchange rate fluctuation on stock returns vary enormously for different currencies. (2) During the U.S. dollar appreciating period, MNCs benefit very little from this appreciation against major trade partners’ currencies, but most MNCs see harmful impacts from a U.S. dollar appreciation against the Brazilian real. (3) During the U.S. dollar depreciating period, most U.S. MNCs benefit from this depreciation against the European Monetary Union’s euro, Mexican new peso and Brazilian real; however, they overall suffer losses against the Chinese yuan, Japanese yen, and British pound. (4) The level of foreign sales is the key determinant of economic exposure.

Keywords: Exchange exposure; Foreign exchange risk; Multinationals; GARCH (search for similar items in EconPapers)
JEL-codes: F23 F31 G15 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:ecofin:v:39:y:2017:i:c:p:273-287